www.plindia.com
April to June 2017
Quarterly Preview
Q1FY18 Results Preview, expect a beƩer Q1 in revenue, PAT under pressure
Apr‐Jun 2017 Earnings Preview
THIS PAGE IS INTENTIONALLY LEFT BLANK July 11, 2017 2
Apr‐Jun 2017 Earnings Preview
Contents Page No. Quarterly Preview .............................................................................. 5 Auto ................................................................................................. 22 BFSI .................................................................................................. 33 Capital Goods ................................................................................... 56 Cement ............................................................................................. 69 Consumer ......................................................................................... 76 Information Technology ................................................................... 91 Metals & Mining ............................................................................ 100 Oil & Gas ........................................................................................ 111 Pharmaceuticals ............................................................................. 121 Others ............................................................................................ 133 Annexure ........................................................................................ 139 (All prices as on July 10, 2017) Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision. Please refer to important disclosures and disclaimers at the end of the report July 11, 2017 3
Apr‐Jun 2017 Earnings Preview
THIS PAGE IS INTENTIONALLY LEFT BLANK July 11, 2017 4
Apr‐Jun 2017 Earnings Preview
Quarterly Preview Q1FY18 Results Preview, expect a better Q1 in revenue, PAT under pressure PL universe ex‐ financials is expected to have a better Q1FY18 with 8.2% increase in revenue and 5.5% fall in net profit on a YoY basis. While the sales growth may look promising, the fall in PAT is expected to come in from Automobiles 9.2%, Cement 4.4%, Oil & Gas 23.7% and Pharma 31.0%. Liquidity remain strong, Credit growth still anemic The credit growth has been anemic and was at 6.0% for the fortnight ended 23 June 2017. With banks continuing to be flushed with funds, the spreads are coming under increased pressure. With the capacity utilization of the Indian industry still hovering in the low seventies, we continue to believe that the capex cycle will take a while to recover leading to pressure on deposit rates and lending rates with NIMs seeing a contraction. Q1FY18 Nifty Earnings Overall Net revenue for the Nifty is expecetd to increase 7.01% QoQ and for the Nifty Ex‐Oil & Gas it is expected to grow at 6.9%. Overall EBITDA is expecdted to contract 1.5% while Ex‐Oil & Gas it is expecteed to be up 3.4% . The net earnings is expected to increase 2.4% and Ex‐Oil & Gas it is expected to increase 4.2%. Sector‐wise growth and margin expectations – Q1FY18 PL estimates Revenue (%) PAT (%) EBITDA Margin (bps) YoY QoQ YoY QoQ YoY QoQ Automobiles (1.9) (13.5) (9.2) (28.9) (65) (80) Banks 14.4 (1.8) 14.6 17.0 Capital Goods 6.5 (33.1) 12.2 (63.3) 47 (296) Cement 12.3 6.9 (4.4) 23.9 (241) 337 Consumer Staples 9.1 4.0 7.0 4.0 (44) 19 Financial Services 13.3 (8.9) (3.9) (13.9) Information Tech. 2.6 (0.4) (3.4) (5.6) (109) (128) Metals 24.0 (14.4) 40.6 (23.6) 6 39 Oil & Gas 9.2 (8.8) (23.7) (17.8) (375) 180 Pharma 0.6 0.8 (31.0) 19.9 (460) 238 Others 10.3 5.1 (6.2) 45.9 (187) 298 PL Universe 8.2 (9.6) (5.5) (12.2) (179) 31 Source: Company Data, PL Research *EBITDA Margins are excluding BFSI For the PL universe, the growth in revenue is expected at 8.2% YoY and (9.6%) QoQ with net income up at (5.5%) YoY and (12.2%) QoQ. July 11, 2017 5
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18E
(%)
July 11, 2017 60.0
40.0
20.0
0.0
‐20.0
(36.5)
27.3
8.3
6.2
19.6
10.4
22.2
20.8
25.3
6.7
(4.0)
2.4 5.3 0.1 4.8 3.1 3.7 8.3 8.4 80.0
5.8
3.9
8.5
4.7
3.0
68.5 60.0
50.0
40.0
30.0
20.0
10.0
0.0
‐10.0
‐20.0
‐30.0
1.9
12.4
51.1
36.7
26.9
24.3
11.8
15.9
18.8
30.8
4.8
3.2
‐4.3
10.6
4.2
28.1
8.1
8.8
16.5
‐2.0
4.3
‐1.5
‐16.8
0.6
26.5
20.7
30.0
38.6
26.8
32.7
11.8
20.0
32.3
13.7
13.9
‐0.7
‐16.3
0.9
23.1
41.1
37.1
30.7
24.7
8.5
58.6
47.9
61.7
79.7
14.2
16.3
8.3
5.8
7.0
17.8
14.6
15.7
17.9
3.1
‐2.0
(12.3)
(5.9)
(6.2)
(3.9)
3.5 (0.1)
3.5 7.7 15.2 7.0 0.0
‐4.9
5.3
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18E
20.0
1.3
40.0
35.9
60.0
17.6
80.0
61.0
40.3
48.7
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18E
(%)
100.0
11.3
1.8
1.6
25.6
‐11.6
‐15.3
8.7
14.0
33.5
(%)
Apr‐Jun 2017 Earnings Preview
Nifty Revenue Growth (YoY) ‐20.0
‐40.0
Source: Bloomberg, PL Research Nifty EBITDA Growth (YoY) Source: Bloomberg, PL Research Nifty PAT Growth (YoY) ‐40.0
‐60.0
6
Source: PL Research Apr‐Jun 2017 Earnings Preview
The banking sector is likely to end up with better treasury income this quarter too with a 40bps fall in yields during the quarter. The 10 year GSecs are trading at 6.48%, a reduction of 40bps in yield indicating the underlying strong liquidity scenario. Better monsoon expected in FY18 Initial indications of monsoon for FY18 have been better and so is the case of Kharif sowing. The total sown area as on 7th July 2017 stands at 404.27 lakh hectare as compared to 371.39 lakh hectare at this time last year. It is reported that rice has been sown/transplanted in 79.81 lakh ha, pulses in 44.11 lakh ha, coarse cereals in 80.78 lakh ha, sugarcane in 47.93 lakh hectare and cotton in 71.82 lakh ha, in all cases higher than the similar period last year. Cumulative rainfall (till 6th of July) Source: IMD, PL Research Most areas have received normal rainfall so far except Kerala and some parts of Karnataka, central India and West Bengal. July 11, 2017 7
Apr‐Jun 2017 Earnings Preview
Seasonal Rainfall Scenario – June 01, 2017 to July 05, 2017 Actual Rainfall Normal Rainfall
Region (mm) (mm)
Country as a whole 217.3 206.7
% Departure from LPA
5%
North‐West India 138.6 94.5
47%
Central India 223.8 212.8
5%
South Peninsula 192.9 194.3
‐1%
East & North‐East India 385.4 425.2
‐9%
Source: IMD, PL Research Kharif sowing as of July 07, 2017 (m hectares) Crop Area sown in 2017‐18
Area sown in 2016‐17
YoY gr. (%)
Rice 8.0
7.5
6.0%
Pulses 4.4
3.6
22.9%
Coarse Cereals 8.1
7.0
15.2%
Oilseeds 7.3
7.0
4.5%
Sugarcane 4.8
4.5
6.0%
Jute & Mesta 0.7
0.7
‐4.4%
Cotton 7.2
6.8
5.8%
40.4
37.1
8.9%
Total Source: Ministry of Agriculture, PL Research IMD has estimated the monsoon in the current year to be at 98% of the Long Period Average (LPA) which is comfortable. With monsoon continuing to remain better, we expect to see further improvement in sowing. Already in case of rice, pulses, cotton, cereals, oil seeds and sugarcane, the sowing so far in FY18 have been better than what was in FY17 at the same period. Low crude prices keeps fiscal scenario better The fiscal discipline continues to remain better and both the CAD and the trade deficit continue to remain under control. Trade Deficit (US$ m) Oct’16 Nov’16 Dec’16
Jan’17
Feb’17
Mar’17
Apr’17 May’17 FYTD
FYTD YoY
Exports 23,513 20,010 23,885
22,115
24,490
29,232
24,635 24,015 48,650
42,739
10% 2% 7%
4%
17%
28%
20% 8% 14%
33,674 33,018 34,254
31,956
33,387
39,669
37,884 37,856 75,741
YoY gr. Imports 53,857
YoY gr. 8% 10% 1%
11%
22%
45%
49% 33% 41%
‐ Oil 7,141 6,838 7,645
8,141
7,681
9,714
7,359 7,693 15,052
11,595
‐ Gold 3,500 4,364 1,961
2,040
3,480
4,178
3,853 4,959 8,812
2,710
‐ Non Oil Non Gold Trade Deficit YoY gr. 23,032 21,817 24,648
21,775
22,225
25,777
26,672 25,205 51,877
39,552
(10,161) (13,009) (10,369)
(9,841)
(8,896)
(10,437)
(13,249) (13,842) (27,091)
(11,118)
5% 26% ‐11%
28%
35%
137%
173% 121% 144%
Source: Ministry of Commerce, PL Research July 11, 2017 8
Apr‐Jun 2017 Earnings Preview
India’s Balance of Payments (US$ million) Q1FY16 Q2FY16 Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17 Q4FY17 YoY
QoQ
CURRENT ACCOUNT (6,132) (8,559) (7,121)
(338)
(291)
(3,411)
(7,919) (3,452) ‐60%
1074%
I. MERCHANDISE (34,175) (37,173) (33,975)
(24,755)
(23,835)
(25,643)
(33,277) (29,722) ‐31%
8%
II. INVISIBLES 28,043 28,614 26,854
24,417
23,544
22,231
25,358 26,270 ‐22%
‐6%
CAPITAL ACCOUNT 18,637 8,121 10,915
3,455
7,124
12,788
6,155 10,392 57%
79%
1. Foreign Investment 10,226 3,150 11,256
7,259
5,931
22,979
(1,527) 15,796 629%
287%
2.Loans (1,632) (1,944) (2,328)
1,270
(1,603)
(1,673)
1,685 3,987 ‐14%
4%
3. Banking Capital 11,017 7,300 1,315
(9,002)
(148)
(6,606)
3,180 (13,042) ‐190%
4360%
4. Rupee Debt Service (34) (17) (0)
(22)
(35)
(17)
‐ (48) 3%
‐50%
(940) (368) 672
3,951
2,979
(1,895)
2,817 3,698 416%
‐164%
Errors & Omissions (1,075) (419) 262
158
135
(865)
522 372 107%
‐739%
Overall Balance 11,430 (856) 4,056
3,274
6,969
8,512
(1,242) 7,312 ‐1094%
22%
5. Other Capital Source: RBI, PL Research Capital Accounts & Finance Account (US$ m) Q1FY16 Q2FY16
Net FDI 10,003 6,519
Net FII (Equity+Debt) Net Overseas borrowings by Banks NRI Deposits Net inflows under Capital & Finance account Q4FY16
10,702
8,797
554
(1,538)
Q1FY17 Q2FY17 Q3FY17 Q4FY17
YoY
QoQ
4,997
160%
342%
6,050 (11,341) 10,799
‐280%
188%
(1,526) (8,694) 21,710 (15,739)
‐383%
470%
3,828
223 (3,369)
5,131 3,072
485 92
(0)
0
(2,360) (103)
(1,786)
2,639
5,886 4,227
1,550
4,388
18,637 8,121
10,915
3,455
7,124
Net ECBs Net Short term credit to India Q3FY16
(235) (13,390)
2,103
16,929 ‐
9,814 ‐ (261) 609
(310)
(182) 2,964 3,996
77%
‐41%
1,378
2,088 (18,530) 2,698
‐51%
52%
6,155 10,392
57%
79%
12,788 Source: RBI, PL Research Inflation, at the lower end of the range Both the WPI and the CPI have been inching down in the last couple of months towards the lower end of the range where the RBI is expected to be comfortable. The WPI inflation fell to 2.2% in May 2017 and the CPI fell to 2.0%. WPI Inflation Food Article 6%
5%
5.5%
5%
4.3%
5.3%
3%
4%
3.9%
3%
2%
1.8%
4.0%
4%
2%
1%
2.1%
4.0%
1.9%
1.3%
1.8%
0.1%
0%
2.2%
‐1%
1%
‐3%
0%
Nov‐16 Dec‐16 Jan‐17 Feb‐17 Mar‐17 Apr‐17 May‐17
Source: Ministry of Commerce & Industry ‐1.8%
‐2%
July 11, 2017 Nov‐16 Dec‐16 Jan‐17 Feb‐17 Mar‐17 Apr‐17 May‐17
Source: Ministry of Commerce & Industry 9
Apr‐Jun 2017 Earnings Preview
CPI Inflation Combined
9.0
8.5
8.0
7.0
6.1
6.8
6.0
5.6
5.0
5.4
4.0
4.2
5.7
3.7
3.3
3.0
5.0
3.0
Jan‐14
Feb‐14
Mar‐14
Apr‐14
May‐14
Jun‐14
Jul‐14
Aug‐14
Sep‐14
Oct‐14
Nov‐14
Dec‐14
Jan‐15
Feb‐15
Mar‐15
Apr‐15
May‐15
Jun‐15
Jul‐15
Aug‐15
Sep‐15
Oct‐15
Nov‐15
Dec‐15
Jan‐16
Feb‐16
Mar‐16
Apr‐16
May‐16
Jun‐16
Jul‐16
Aug‐16
Sep‐16
Oct‐16
Nov‐16
Dec‐16
Jan‐17
Feb‐17
Mar‐17
Apr‐17
May‐17
2.0
Source: CSO CPI Index Basket Weights Sub group/group Cereals and products Meat and Fish Egg Milk and Milk products Oils and Fats Fruits Vegetables Pulse and Products Sugar and Confectionery Food, beverages and tobacco Pan, tobacco and Intoxicants Clothing and footwear Housing Fuel and Light Miscellaneous All Groups Rural
19.1
3.3
8.6
4.7
3.4
6.6
1.9
2.4
2.1
54.2
3.3
7.4
Urban 8.7 1.9 6.6 2.9 2.3 4.0 1.9 1.3 1.2 36.3 1.4 5.6 21.7 5.6 29.5 100 7.9
27.3
100
Combined (Rural+Urban)
14.6
2.7
7.7
3.9
2.9
5.4
1.9
1.9
1.7
45.9
2.4
6.5
10.1
6.8
28.3
100
Source: CSO YoY GDP Growth CY16E
CY15E
CY14
China
CY13
CY12
CY11
World
CY10
CY09
CY08
Europe
CY07
CY06
US
CY05
CY04
CY02
CY01
CY03
India*
15.0 13.0 11.0 9.0 7.0 5.0 3.0 1.0 (1.0)
(3.0)
(5.0)
Source: Bloomberg, PL Research July 11, 2017 10
Apr‐Jun 2017 Earnings Preview
Trading range for the Nifty to be between 9000‐9900 We had revised the trading range for the market in our report dated June 12, 2017 to be between 9000‐9900 levels. We see no reason to change our thought process at present unless we see any significant changes happening post results commentary from corporate or any fiscal change in the near term. We are maintaining the near term trading range for the market to be between 9000‐9900 levels. The recent strong stock performance of many stocks in our coverage universe leaves with little upside in many stocks in the near term. The economy has been seeing some disruptions for the last three quarters. If it was demonetisation that impacted Q3/Q4FY17, it is the GST implementation which will impact 1QFY18. We expect normalcy to return towards the end of Q2FY18 as the festivals in Q3FY18 is expected to see normalcy returning and probably could be the best quarter in the last twelve months. We also expect the banks to lead the earnings in FY18 as well. While we expect the first two quarters in FY18 to see the impact of higher credit costs on ageing issues of the existing NPAs, this is expected to see a decelerating trend as we enter the second half of the current fiscal. FIIs and DIIs net buyers The FII and DII continue to remain strong buyers helping the market remain at elevated levels. The midcaps and the small cap indices did better than the benchmark Nifty and the Sensex in June 17. However, we still believe it will be a while before the earnings start to catch up and it will be a state of PER expansion that will continue. In CY17 so far, the DIIs have pumped in US$3.3bn and the FIIs have pumped in US$8.6bn. India: FII/DII Equity Flows DII Net Cash Market
CY16
FII Rs187.83bn(US$ 2.8bn) DII Rs371.12bn(US$ 5.5bn)
FII Debt Rs‐442.97bn (US$‐6.5bn)
FII Debt Market
CY17
FII Rs559.08bn(US$8.6bn) DII Rs213.41bn(US$3.3bn)
FII Debt Rs946.84bn (US$14.6bn)
Jan‐15
Feb‐15
Mar‐15
Apr‐15
May‐15
Jun‐15
Jul‐15
Aug‐15
Sep‐15
Oct‐15
Nov‐15
Dec‐15
Jan‐16
Feb‐16
Mar‐16
Apr‐16
May‐16
Jun‐16
Jul‐16
Aug‐16
Sep‐16
Oct‐16
Nov‐16
Dec‐16
Jan‐17
Feb‐17
Mar‐17
Apr‐17
May‐17
Jun‐17
400
300
200
100
0
‐100
‐200
‐300
CY15
FII Rs183.5bn (US$ 2.74bn) DII Rs675.5bn (US$ 10.08bn)
FII Debt Rs469.21bn (US$6.9bn)
FII Net Cash Market
Source: Bloomberg, PL Research July 11, 2017 11
Apr‐Jun 2017 Earnings Preview
Global Equity Markets Performance Month‐on‐Month 3.0 2.5 2.2 1.7 2.0 0.9 0.8 0.6 0.3 ‐
(0.3) (0.5)
(1.0)
(2.0)
(1.0)
(1.8)
FTSE
S&P
Brazil
Japan
India
Australia
S.Korea
USA
Indonesia
Russia
China
(3.0)
(2.4) (2.5)
Germany
(%)
1.0 Hong Kong
Emerging markets steal the show
Source: Bloomberg, PL Research India and South Korea and Hong Kong
Calendar Year‐to‐date were the best perforating markets YTD
15.0 10.0 (%)
5.0 17.8 17.4 20.0 9.8 15.2 8.1 4.3 4.4 3.7 7.6 7.6 2.8 0.7 ‐
(5.0)
(10.0)
(15.0)
Germany
Hong Kong
FTSE
S&P
Brazil
Japan
India
Australia
S.Korea
USA
Indonesia
China
Russia
(14.5)
(20.0)
Source: Bloomberg, PL Research Japan and Germany have seen the bet
Year‐on‐Year returns over 12 month period
35.0 31.1 30.5 30.0 (%)
25.0 20.0 17.0 22.4 20.9 19.4 20.6 15.3 14.9 15.0 10.0 6.7 5.0 12.4 9.1 1.5 Germany
Hong Kong
FTSE
S&P
Brazil
Japan
India
Australia
S.Korea
USA
Indonesia
Russia
China
‐
Source: Bloomberg, PL Research July 11, 2017 12
Apr‐Jun 2017 Earnings Preview
Indian Equities – Sector Performance IT, Oil & Gas and Cap goods saw losses
Month‐on‐Month while Realty and consumer durables were
the better performers in the last one
(%)
month.
12.0 10.0 8.0 6.0 4.0 2.0 ‐
(2.0)
(4.0)
(6.0)
10.4 5.9 4.4 3.1 1.3 (0.8)
(1.5)
(1.8)
(2.6)
(3.7)
(5.1)
Source: Bloomberg, PL Research (%)
Calendar Year‐to‐date 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 ‐
(10.0)
70.6 42.7 31.4 27.7 16.3 17.6 12.3 26.5 11.1 (2.3)
(3.8)
Source: Bloomberg, PL Research Realty, Metals, Consumer Durables and
Year‐on‐Year Oil& Gas have been the biggest gainers in
40.0 the last twelve months.
30.0 37.4 35.3 28.0 24.8 (%)
20.0 11.0 34.2 33.5 21.6 12.9 10.0 ‐
(10.0)
(20.0)
(9.9)
(11.0)
Source: Bloomberg, PL Research July 11, 2017 13
Apr‐Jun 2017 Earnings Preview
India: Market cap‐wise Performance Small caps out performance continues
Month‐on‐Month 3.0 2.6 2.5 (%)
2.0 1.5 1.0 1.0 0.6 0.3 0.5 0.3 0.0 ‐
BSE Small‐CapBSE Mid‐Cap
BSE‐500
BSE‐100
Sensex
Nifty
17.8 18.1 Sensex
Nifty
15.3 15.9 Sensex
Nifty
Source: Bloomberg, PL Research Calendar Year‐to‐date Small caps out performance continues YTD
35.0 as well
31.4 30.0 24.2 (%)
25.0 21.5 20.0 19.5 15.0 10.0 5.0 ‐
BSE Small‐CapBSE Mid‐Cap
BSE‐500
BSE‐100
Source: Bloomberg, PL Research Small caps have given a 2X out Year‐on‐Year performance over twelve months; while 35.0 mid caps also have given a huge out
30.0 performance.
32.0 25.9 (%)
25.0 20.4 17.8 20.0 15.0 10.0 5.0 ‐
BSE Small‐CapBSE Mid‐Cap
BSE‐500
BSE‐100
Source: Bloomberg, PL Research July 11, 2017 14
Apr‐Jun 2017 Earnings Preview
Global Currency Movement Over the last one month, South African
Month‐on‐Month Rand and Russian rouble have taken a hit
6.0 4.7 4.0 1.2 0.7 (%)
2.0 0.1 ‐
(0.2)(0.2)(0.3)(0.5)(0.5)(0.6)
(0.9)(1.2)
(1.9)(2.1)
(2.6)
(3.5)(4.0)
(2.0)
(4.0)
(6.0)
(5.8)
(8.0)
Source: Bloomberg, PL Research YTD, Euro has seen the better performance.
Calendar Year‐to‐date 10.0 8.4 8.0 (%)
6.0 4.2 6.0 5.5 5.7 5.1 5.3 4.0 4.7 4.4 4.4 2.8 2.7 2.2 2.0 0.7 1.7 ‐
(2.0)
(0.9)
(4.0)
(2.0)
(2.6)
Source: Bloomberg, PL Research Turkish Lira and Japanese Yen have been Year‐on‐Year the worst performers over the last twelve
15.0 months while South African Rand and
10.0 Russian rouble have performed better. Vs 5.0 the US Dollar
10.5 3.0 1.6 1.5 3.3 4.6 0.8 6.7 5.9 2.5 0.4 (%)
‐
(5.0)
(10.0)
(1.8)
(1.3)(0.2)
(6.0)
(6.8)
(15.0)
(20.0)
(25.0)
(11.5)
(18.8)
Source: Bloomberg, PL Research July 11, 2017 15
Apr‐Jun 2017 Earnings Preview
Global Agricultural Commodities Sugar has continued to see correction last
Month‐on‐Month month as well while wheat staged a smart
25.0 recovery up 19.3% in one month.
20.0 19.3 (%)
15.0 10.0 7.6 4.1 5.0 2.0 ‐
(2.3)
(5.0)
Wheat
Soya
Rice
Corn
Sugar
(3.1)
Palm Oil
Source: Bloomberg, PL Research Calendar Year‐to‐date Sugar has been the worst performing
30.0 agricultural commodity YTD followed by
20.0 Palm oil. 16.0 20.0 5.9 10.0 (%)
1.4 ‐
(10.0)
(20.0)
(16.9)
(30.0)
Wheat
Soya
Rice
Corn
(25.5)
Sugar
Palm Oil
Source: Bloomberg, PL Research Year‐on‐Year Over the last twelve months too sugar
15.0 continues to post losses while Palm oil has
10.0 seen an uptick.
8.3 10.6 6.7 5.0 6.0 1.6 (%)
‐
(5.0)
(10.0)
(15.0)
(20.0)
(25.0)
Wheat
Soya
Rice
Corn
(23.0)
Sugar
Palm Oil
Source: Bloomberg, PL Research July 11, 2017 16
Apr‐Jun 2017 Earnings Preview
Global Industrial Commodities Lead and Zinc have seen an upward
Month‐on‐Month movement, other global industrial 12.0 commodities have corrected 10.3 9.1 10.0 (%)
8.0 6.0 4.0 3.0 4.0 2.0 ‐
(0.3)
(2.0)
Zinc
Lead
Copper
Nickel
(0.4)
(0.6)
Brent Aluminium Thermal crude
Coal
Source: Bloomberg, PL Research Crude and Nickel continue to post losses
Calendar Year‐to‐date YTD.
20.0 14.0 15.0 (%)
10.0 7.9 12.7 6.2 5.0 ‐
(2.0)
(5.0)
(10.0)
(8.3)
(15.0)
Zinc
Lead
Copper
Nickel
(12.2)
Brent Aluminium Thermal crude
Coal
Source: Bloomberg, PL Research Over the last twelve months, thermal coal
Year‐on‐Year continues to be the worst performer.
40.0 30.0 29.1 23.7 20.2 17.1 (%)
20.0 10.0 4.6 ‐
(10.0)
(9.9)
(20.0)
(30.0)
Zinc
Lead
Copper
Nickel
(25.4)
Brent Aluminium Thermal crude
Coal
Source: Bloomberg, PL Research July 11, 2017 17
Apr‐Jun 2017 Earnings Preview
NIFTY: Earnings set to grow 19.6% in FY18 Against EPS of Rs425.4 for FY17, FY18 EPS is expected at Rs508.7, an increase of 19.6%. At the estimated EPS of Rs508.7, the market is trading at 19X earnings. The growth, like in FY17 is expected to be led by banking and automobiles. The market is trading at a one year forward multiple of 18.2X against the last ten year average of 17.1X and at a premium of 30% to the MSCI Asia (Ex Japan) against the 10 year average premium of 35%. We have removed Kansai Nerolac Paints and HCL Tech from our top picks as Kansai have hit achieved the price target and HCL Tech faces newer challenges. Nifty 1‐yr forward PE MSCI India Premium to MSCI Asia (Ex‐Japan) 80%
10 year Avg.
17.1x
40%
20%
Source: Bloomberg, PL Research Jul‐16
Jul‐15
Jul‐14
Jul‐13
Jul‐12
30%
Jul‐07
Jul‐17
Jul‐16
Jul‐15
Jul‐14
Jul‐13
Jul‐12
Jul‐11
‐40%
Jul‐10
‐20%
‐
Jul‐09
5.0 Jul‐08
0%
Jul‐07
10.0 Jul‐11
18.2 Jul‐10
15.0 10 year Avg.
35%
Jul‐09
20.0 60%
Jul‐08
25.0 Jul‐17
30.0 Source: Bloomberg, PL Research July 11, 2017 18
Apr‐Jun 2017 Earnings Preview
Nifty Valuation Banking & Fin.
PER (x)
PAT Growth (%)
Weight‐ age (%)
34.9%
Technology
PER (x)
PAT Growth (%)
11.4%
Auto
PER (x)
PAT Growth (%)
11.0%
FMCG
PER (x)
PAT Growth (%)
11.4%
Oil & Gas
PER (x)
PAT Growth (%)
10.4%
Eng. & Power
PER (x)
PAT Growth (%)
6.5%
Pharma
PER (x)
PAT Growth (%)
4.5%
Cement PER (x)
PAT Growth (%)
2.1%
FY16
FY17
FY18E
FY19E
Weight‐ age (%)
4.0%
31.8 27.2
(12.4) 17.0
20.1
35.3
16.1
25.4
Metals
PER (x)
PAT Growth (%)
15.8
9.1
15.5
2.3
14.1
9.8
Telecom
PER (x)
PAT Growth (%)
2.2%
17.2
12.4
23.7 19.5
(2.9) 21.7
16.4
19.0
Media
PER (x)
PAT Growth (%)
0.7%
23.0
10.9
0.8%
49.4
2.4
45.8
8.0
33.5
19.2
14.1
35.8
12.0
17.9
11.4
5.3
10.6
7.7
Ports & Logistics
PER (x)
PAT Growth (%)
Nifty as on Jul 07
EPS (Rs) ‐ Free Float
Growth (%)
PER (x)
19.7
9.7
16.6
18.4
15.1
9.9
12.8
18.2
EPS (Rs) ‐ Free Float
Nifty Cons.
Var. (PLe v/s Cons.) (%)
23.9
6.3
22.1
8.1
22.5 20.4
(1.9) 10.2
45.5
6.0
45.7 41.9
(0.5) 9.1
39.9
14.7
27.8
50.8
Sensex as on Jul 07
EPS (Rs) ‐ Free Float
Growth (%)
PER (x)
FY16
FY17
277.6 16.9
(314.2) 1,541.3
27.5
16.0
FY18E
11.1
52.4
FY19E
9.6
15.1
35.0 38.1 28.7
(21.4) (8.2) 33.0
59.2 21.9
(15.8) 169.9
32.0 26.8
(31.4) 19.1
17.0
23.9
13.2 11.4
(5.5) 15.2
12.5
36.4
9,771
384.2 425.4
(0.8) 10.7
25.4 23.0
508.7
19.6
19.2
595.3
17.0
16.4
384.2
‐
425.4
‐
500.8
1.6
600.1
(0.8)
1,384.8
10.4
22.9
1,358.1 1,574.4
(1.9) 15.9
23.4 20.1
1,837.5
16.7
17.3
1,384.8
‐
1,358.1
‐
1,865.5
(1.5) 31,716
Sensex Cons.
Var. (PLe v/s Cons.) (%)
1,548.0
1.7
Source: Company Data, Bloomberg, PL Research Note: Telecom Nos. is Bloomberg Consensus / Sector Weightages are updated as on July 10, 2017 For Detailed Break‐up of Company & Sector wise please refer Page No. 139‐146 July 11, 2017 19
Apr‐Jun 2017 Earnings Preview Top Picks Top Picks Summary Bloomberg Code
CMP (Rs.)
TP (Rs) Upside
Mcap (Rs bn)
Mcap Revenue Gr. (%)
(US$ m) 2018E
2019E
Earnings Gr. (%)
RoE (%)
RoCE (%)*
PER (x)
P/BV (x)*
2018E
2019E
2018E
2019E
2018E
2019E
2018E
2019E
2018E
2019E
Large Cap
HDFCB IN
HDFC Bank
1,677
1,940
15.7%
4,296.4
66,838.3
21.1
20.9
20.7
19.7
18.3
18.8
1.9
1.9
24.3
20.3
4.4
3.7
HUVR IN
Hindustan Unilever
1,097
1,204
9.8%
2,373.3
36,921.2
11.1
13.0
14.9
21.1
134.8
139.7
99.2
104.4
48.3
39.9
63.2
49.9
SBIN IN
State Bank of India
MSIL IN
Maruti Suzuki
IOCL IN
Indian Oil Corporation
ICICIBC IN ICICI Bank
286
356
24.7%
2,276.8
35,420.6
12.9
11.1
49.5
36.6
8.2
10.4
0.6
0.7
14.3
10.5
1.9
1.6
7,435
7,903
6.3%
2,245.3
34,929.4
18.1
15.4
18.0
14.8
22.1
21.8
21.8
21.5
25.9
22.6
5.3
4.6
383
514
34.3%
1,857.9
28,902.7
18.0
10.6
(0.1)
4.2
22.3
20.5
14.9
13.8
9.1
8.8
1.9
1.7
292
380
30.4%
1,698.1
26,417.9
16.1
12.0
24.8
19.3
11.7
12.7
1.5
1.6
13.9
11.6
2.1
1.8
LT IN
Larsen & Toubro
1,732
1,900
9.7%
1,613.5
25,101.8
12.0
15.0
(1.3)
18.2
12.1
13.7
4.4
4.8
25.2
21.3
3.1
2.7
YES IN
YES Bank
1,513
1,850
22.3%
690.5
10,741.4
36.6
26.1
27.9
22.8
18.8
20.0
1.9
1.9
15.6
12.7
2.8
2.4
BRIT IN
Britannia Industries
3,712
4,255
14.6%
445.5
6,930.1
15.2
16.4
19.5
21.0
40.6
39.1
40.5
38.9
44.2
36.5
16.1
12.8
ARBP IN
Aurobindo Pharma
710
877
23.5%
415.9
6,470.6
9.0
10.7
10.3
12.4
24.9
23.3
18.6
18.9
16.4
14.6
3.8
3.1
LTFH IN
L&T Finance Holdings
150
210
40.2%
263.0
4,091.6
17.1
14.4
30.5
36.5
14.5
17.3
1.5
1.9
22.0
16.1
3.0
2.6
Mid Caps
GNP IN
Glenmark Pharmaceuticals
IGL IN
Indraprastha Gas
676
974
44.1%
190.8
2,968.8
6.2
9.4
13.6
28.4
24.8
25.0
14.6
16.5
15.1
11.8
3.4
2.6
1,074
1,149
7.0%
150.3
2,338.3
21.4
10.6
24.7
13.1
22.8
21.7
22.8
21.7
21.1
18.7
4.4
3.7
JSP IN
Jindal Steel & Power
135
170
26.4%
123.1
1,915.0
45.3
15.1
(18.5)
(133.0)
(10.7)
3.7
1.8
5.2
(7.9)
24.0
0.9
0.9
CAFL IN
Capital First
718
856
19.3%
69.9
1,087.7
38.9
34.1
33.0
36.5
13.4
16.0
1.8
2.0
21.3
15.6
2.7
2.3
JKLC IN
JK Lakshmi Cement
470
630
34.0%
55.3
861.0
16.0
15.0
90.1
125.0
10.6
21.2
8.1
13.2
35.5
15.8
3.6
3.1
PSYS IN
Persistent Systems
667
710
6.5%
53.3
829.9
8.6
13.1
13.7
15.0
17.3
17.5
17.2
17.4
15.6
13.5
2.5
2.2
SADE IN
Sadbhav Engineering
296
371
25.4%
50.2
780.5
17.0
15.8
9.8
10.0
11.8
11.7
10.2
10.1
24.3
22.1
2.7
2.4
THYROCAR I Thyrocare Technologies
740
1,067
44.2%
39.8
618.5
28.5
29.9
43.8
32.0
26.0
30.2
25.1
29.3
39.0
29.5
9.7
8.3
HEIM IN
Heidelberg Cement India
134
160
19.7%
30.3
471.5
12.3
11.3
71.8
44.5
13.7
17.8
10.4
13.8
23.2
16.1
3.1
2.7
RMKF IN
Ramkrishna Forgings
515
655
27.3%
14.8
229.6
33.6
23.1
231.6
85.5
12.1
19.4
8.6
12.0
23.4
12.6
2.7
2.2
Source: PL Research * For Banks P/BV = P/ABV & RoCE = RoAA
July 10, 2017 20 Apr‐Jun 2017 Earnings Preview
SECTORS July 10, 2017 21
Apr‐Jun 2017 Earnings Preview
Rohan Korde [email protected] +91‐22‐6632 2235 Poorvi Banka [email protected] +91‐22‐6632 2426 Top picks Maruti Suzuki Automobiles Q1FY18 has been a decent quarter for two‐wheelers/three‐wheelers after last two quarters of decline. Passenger vehicles too continued their YoY growth trajectory, although at a slower pace. However, commercial vehicles, particularly domestic M&HCVs, have suffered on account of the pre‐buying in Q4FY17. On a YoY basis, four‐wheelers (Passenger vehicles as well as commercial vehicles) have reported growth of ~4%, while two‐wheelers have grown at ~3%. Domestic market for two‐
wheelers and three‐wheelers seems to have recovered from the demonetisation slowdown but was somewhat impacted by the expectations of fall in prices post GST. Two‐wheeler/Three‐wheeler exports, which were impacted by the geopolitical instability in key Asian markets for the past few quarters, have seen some recovery in Q1FY18. Heavy commercial vehicles have seen decline across companies owing to the preponement of purchases ahead of BS IV implementation. The passenger vehicle segment also witnessed somewhat mixed pre‐GST consumer sentiment in Q1FY18. The best performing company in Q1FY18 has been Royal Enfield yet again, which with its high waiting period, premium products and relatively lower base has managed to consistently outpace the industry growth (although the growth rate is now lower on the higher base). In the four‐wheeler segment, Maruti Suzuki has continued to grow stronger than the rest. Tractors reported decent performance in the first quarter of the current fiscal. Volume growth in Q1 for our coverage universe: Two & Three‐wheeler companies Volume (units) Q1FY18 YoY gr. (%)
QoQ gr. (%)
Total 3,732,889 3.3
14.1
Hero Motocorp 1,849,375 6.0
14.0
Bajaj Auto 888,434 ‐10.7
12.8
TVS Motors 802,108 11.7
18.9
Royal Enfield 183,998 24.8
3.2
8,974 18.0
7.0
Volume (units) Q1FY18 YoY gr. (%)
QoQ gr. (%)
Total 882,599 3.8
‐11.1
Tata Motors (Standalone) 109,691 ‐11.3
‐27.4
Jaguar Land Rover 136,758 1.8
‐21.8
Maruti Suzuki 394,571 13.2
‐4.8
M&M 201,501 2.2
7.0
Atul Auto Source: SIAM Data, PL Research Four‐wheeler companies Ashok Leyland 28,495 ‐8.6
‐40.2
VECV 11,583 ‐27.2
‐30.2
Source: SIAM Data, PL Research July 11, 2017 22
Apr‐Jun 2017 Earnings Preview
Given the government focus on rural development and an average monsoon, Hero Motocorp and Maruti Suzuki are expected to see volume boost, going ahead. Stock Performance Absolute
1M
3M
Relative to Sensex
6M
12M
1M
3M
6M
12M
As hok Leyl a nd 11.3
27.5
24.0
12.1
9.8
20.2
6.1
(4.8)
Atul Auto
(0.5)
(9.8)
(4.1)
(12.4)
(1.9)
(17.0)
(22.0)
(29.3)
Ba ja j Auto
(4.8)
(3.8)
(0.4) 4.7
(6.2)
(11.0)
(18.3)
(12.2)
Bha ra t Forge
(4.8) 3.5
20.5
52.0
(6.2)
(3.8) 2.6
CEAT
(1.3) 36.1
54.6
121.2
(2.8) 28.9
36.7
104.3
Ei cher Motors
(6.1) 9.2
21.5
43.6
(7.6) 2.0
3.6
26.7
(6.4) 7.2
35.1
Exi de Indus tri es
2.8
0.9
25.1
32.3
1.3
Hero Motocorp
(1.2) 16.7
21.9
18.1
(2.7) 9.4
4.0
1.2
Ma hi ndra & Ma hi ndra
(4.1) 6.8
12.8
(5.8)
(5.6)
(5.1)
(22.7)
Ma ruti Suzuki
(0.2) 18.8
31.0
78.9
(1.7) 11.5
13.1
62.0
Mothers on Sumi Sys tems
1.6
22.7
42.2
67.9
0.1
15.5
24.3
51.0
Ra mkri s hna Forgi ngs
15.1
1.3
50.1
25.8
13.7
(5.9) 32.2
8.9
(0.4)
15.4
Ta ta Motors
(4.4)
(6.0)
(13.3)
(4.0)
(5.8)
(13.2)
(31.2)
(20.9)
TVS Motors
3.2
19.8
48.6
91.4
1.8
12.6
30.7
74.5
Wa bco Indi a
(0.4)
(4.3) 7.1
(1.3)
(1.9)
(11.6)
(10.8)
(18.2)
Source: Bloomberg, PL Research Summary Financials ‐ Quarterly (Rs m) Companies
As hok Leyl a nd Atul Auto
Ba ja j Auto
Bha ra t Forge
Sa l es
Q1FY18E
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%) 12MFY18E
38,545 42,588 (9.5) 66,179 (41.8)
216,912
12MFY17 YoY gr. (%)
200,187 8.4
EBITDA
Margins (%)
PAT
3,836
10.0
1,962
4,763
11.2
2,461
(19.5) 7,299
(123)bps 11.0
(20.3) 4,788
(47.4)
23,512
(108)bps 10.8
(59.0)
13,209
22,025
11.0
12,335
6.7
(16)bps
7.1
Sa l es
EBITDA
Margins (%)
1,110
116
10.5
930
87
9.4
19.3 1,041
33.3 103
110 bps 9.9
6.6 5,528
12.8 729
58 bps 13.2
4,753
599
12.6
16.3
21.8
60 bps
PAT
Sa l es
69
51,901
50
57,480
37.8 62
(9.7) 48,973
11.4
6.0
460
238,282
373
217,667
23.2
9.5
EBITDA
Margins (%)
PAT
10,105
19.47
8,619
11,763
20.5
9,784
(14.1) 9,060
(100)bps 18.5
(11.9) 8,018
11.5
46,507
97 bps 19.5
7.5
40,137
44,223
20.3
38,276
5.2
(80)bps
4.9
Sa l es
EBITDA
10,658
3,096
9,044
2,444
17.8
26.7
11,257
3,200
(5.3) 73,528
(3.2) 15,324
63,962
12,511
15.0
22.5
Margins (%)
PAT
29.05
1,677
27.0
1,221
202 bps 28.4
37.4 1,820
63 bps 20.8
(7.9) 7,825
19.6
6,138
128 bps
27.5 Source: Company Data, PL Research July 11, 2017 23
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Sa l es
EBITDA
Margins (%)
PAT
Sa l es
EBITDA
Q1FY18E
14,927
1,406
9.4
707
19,573
6,076
Q1FY17
14,558
1,855
12.7
971
15,557
4,702
Margins (%)
31.0
30.2
82 bps 31.0
7 bps 30.6
30.9
(31)bps
PAT
Sa l es
EBITDA
Margins (%)
PAT
Sa l es
EBITDA
4,606
21,720
3,228
14.9
2,079
79,159
12,761
3,763
20,111
3,150
15.7
1,961
73,989
22.4 4,594
8.0 19,757
2.5 2,618
(80)bps 13.3
6.1 1,648
7.0 69,152
0.3 21,590
9.9
88,590
23.3
12,896
161 bps 14.6
26.2
8,219
14.5 317,114
16,671
76,144
11,064
14.5
6,888
284,750
29.5
16.3
16.6
3 bps
19.3
11.4
Margins (%)
PAT
Sa l es
16.1
9,220
113,804
12,301
16.6
8,831
110,408
3.7 9,576
(50)bps 13.8
4.4 7,178
3.1 112,251
33.3 53,344
227 bps 16.8
28.5 38,831
1.4
491,312
46,348
16.3
33,771
437,854
15.1
54 bps
15.0
12.2
EBITDA
Margins (%)
PAT
Sa l es
12,891
11.3
8,843
173,924
12,855
11.6
8,870
149,273
0.3 10,385
(32)bps 9.3
(0.3) 7,549
24.1
56,893
208 bps 11.6
17.1
44,412
48,054
11.0
34,072
18.4
60 bps
30.3
EBITDA
Margins (%)
PAT
Sa l es
EBITDA
Margins (%)
24,357 22,157
14.0 14.8
16,675 14,862
117,542 104,504
11,181 9,404
9.5120392 9.0
16.5 183,334
9.9 25,607
(84)bps 14.0
12.2 17,090
12.5 112,839
18.9 12,543
51 bps 11.1
(5.1)
(4.9)
4 bps
(2.4)
4.2
(10.9)
(160)bps
803,821
119,256
14.8
86,615
471,566
52,104
11.0
680,348
102,494
15.1
73,377
424,752
42,665
10.0
18.1
16.4
(23)bps
18.0
11.0
22.1
100 bps
PAT
4,192
3,124
Sa l es
EBITDA
Margins (%)
PAT
Sa l es
EBITDA
Margins (%)
2,625
498
19.0
102
585,120
77,296
13.2
2,178
418
19.2
62
658,950
92,909
34.2
20.5
19.1
(22)bps
64.2
(11.2)
(16.8)
(47.3)
(9.1)
(11.7)
(56)bps
(27.4)
(24.2)
(34.4)
22,130
11,698
2,358
20.2
631
3,119,131
435,076
16,074
8,755
1,645
18.8
190
2,696,925
369,124
37.7
33.6
43.3
136 bps
231.6
15.7
17.9
PAT
Sa l es
15,073
32,847
14.1
25,581
28,809
(89)bps 15.3
(41.1) 43,314
14.0 28,445
(206)bps 13.9
(65.2)
134,622
15.5 140,531
13.7
102,499
121,353
26 bps
31.3
15.8
EBITDA
Margins (%)
PAT
Sa l es
EBITDA
2,356
7.2
1,400
5,666
879
2,004
7.0
1,213
5,897
1,044
17.6
22 bps
15.5
(3.9)
1,615
5.7
1,268
5,769
45.9 11,211
150 bps 8.0
10.4 7,294
(1.8)
23,100
8,571
7.1
5,581
20,675
30.8
92 bps
30.7
11.7
Margins (%)
PAT
Source: Company Data, PL Research 15.5
614
17.7
739
(15.8) 776
(219)bps 13.4
(16.9) 496
13.3
3,962
207 bps 17.2
23.8
2,771
3,462
16.7
2,333
14.4
41 bps
18.8 CEAT
Ei cher Motors
Exi de Indus tri es
Hero Motocorp
Ma hi ndra & Ma hi ndra
Ma ruti Suzuki
Mothers on Sumi Sys tems
Ra mkri s hna Forgi ngs
Ta ta Motors
TVS Motors
Wa bco Indi a
July 11, 2017 YoY gr. (%)
2.5
(24.2)
(332)bps
(27.2)
25.8
29.2
Q4FY17 QoQ gr. (%)
14,507 2.9
1,387 1.4
9.6
(14)bps
789 (10.4)
18,881 3.7
5,848 3.9
7,948
2,887
564
19.5
141
772,172
117,875
12MFY18E 12MFY17
67,619
57,665
7,634
6,568
11.3 11.4
4,393
3,612
88,629 70,334
27,121 21,740
YoY gr. (%)
17.3
16.2
(10)bps
21.7
26.0
24.8
24
Apr‐Jun 2017 Earnings Preview
Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) 2017E
Apr‐Jun'17
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
2018E
2019E
Net Sales
5,366,123 6,157,360
7,017,373
Net Sa l es
1,269,120
1,294,275
(1.9) 1,467,442
(13.5)
Growth (%)
3.5
14.7
14.0
EBITDA
170,082
181,855
(6.5) 208,454
(18.4)
EBITDA
741,091
867,926
1,024,887
Margin (%)
13.4
14.1
Margin (%)
13.8
14.1
14.6
PAT (Excl . Ex Items )
75,839
83,491
PAT
352,189 433,140
519,428
Growth (%)
(3.1) 23.0
19.9
24.2
16.4
PE (x)
19.7
(65)bps
14.2
(80)bps
(9.2) 106,704
(28.9)
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. Ashok Leyland Ra ti ng
Accumulate
Pri ce (Rs )
105
Ta rget Pri ce (Rs )
M/Ca p (Rs bn)
299.7
Sha res o/s (m)
2,845.9
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Y/e March
Net Sa l es
FY17
FY18E
FY19E
200,187
216,912
253,893
22,025
23,512
28,751
11.0
10.8
11.3
12,335
13,209
16,767
EPS (Rs )
4.3
4.6
5.9
Growth (%)
NA
7.1
26.9
21.2
20.4
22.8
22.7
17.9
EBITDA
Margin (%)
PAT
RoE (%)
PE (x)
100
AL has reported an 8.6% YoY decline in its volumes in Q1FY18 (after an 8.2% YoY increase in Q4). Average realization/vehicle is expected to be lower by 1% YoY, which would result in revenue decline of 9.5% YoY. We expect a 120bps YoY decline in AL’s EBITDA margin, with EBITDA falling 19.5% YoY. With higher non‐operating income & lower tax provision, profit is expected to decline by ~20% YoY to Rs1.96bn. NA
P / BV (x)
4.9
4.4
3.8
EV / E (x)
13.7
12.7
10.4
July 11, 2017 Q1
FY18E
38,545
Q1
FY17
42,588
YoY gr. (%)
(9.5)
3,836
4,763
(19.5)
7,299
10.0
11.2
(123)bps
11.0
Reported PAT
1,962
2,908
(32.5)
4,762
13,209
12,231
8.0
PAT (Excl. Ex Items )
1,962
2,461
(20.3)
4,788
13,209
12,335
7.1
(1.0) 1,389,699 1,391,328 1,354,468
2.7
Net Sales
EBITDA
Margin (%)
Q4
12M
12M
FY17
FY18E
FY17
66,179 216,912 200,187
23,512
YoY gr. (%)
8.4
22,025
6.7
10.8 11.0
(16)bps
Operating Metrics
Real. / Veh. (Rs)
1,352,880 1,366,546
GM / Veh. (Rs)
410,107
426,224
(3.8)
390,067
421,404
417,835
0.9
EBITDA / Veh. (Rs)
134,633
152,822
(11.9)
153,273
153,697
151,829
1.2
68,849
77,367
(11.0)
100,554
86,348
85,032
1.5
Profit / Veh. (Rs )
25
Apr‐Jun 2017 Earnings Preview
Atul Auto Ra ti ng
Accumulate
Pri ce (Rs )
420
Ta rget Pri ce (Rs )
491
M/Ca p (Rs bn)
9.4
Sha res o/s (m)
22.4
After the fall in volumes in FY17, in Q1FY18, ATA’s volumes have seen a strong recovery, growing 18% YoY. With 1% improvement expected in realisations, ATA is expected to record a 19.3% YoY revenue growth, while the EBITDA margin is likely to be 10.5% (higher 110bps YoY & 60bps QoQ). On lower base, net Profit is expected to grow a strong 37.8% YoY to Rs69m. Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
Net Sa l es
4,753
EBITDA
Margin (%)
FY18E
FY19E
5,528
6,548
599
729
873
12.6
13.2
13.3
Y/e March
Q1
FY18E
Q1
FY17
YoY gr. (%)
Net Sa les
1,110
930
19.3
1,041
5,528
4,753
16.3
116
87
33.3
103
729
599
21.8
10.5
9.4
110 bps
9.9
13.2
12.6
60 bps
EBITDA
Margin (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
PAT
373
460
550
Reported PAT
69
50
37.8
62
460
373
23.2
EPS (Rs )
16.7
20.5
24.5
PAT (Excl . Ex Items )
69
50
37.8
62
460
373
23.2
(21.3) 23.2
19.6
Growth (%)
Operating Metrics
RoE (%)
22.3
23.2
23.2
Rea l. / Vehicle (Rs )
122,764
121,549
1.0
123,172
124,209
121,716
2.0
PE (x)
25.2
20.5
17.1
Gr. Profi t / Veh. (Rs )
33,696
33,579
0.3
30,340
33,694
33,416
0.8
5.2
4.4
3.6
EBITDA/Vehi cl e (Rs )
12,939
11,451
13.0
12,272
16,486
15,429
6.9
10.7
Profit / Vehi cl e (Rs )
7,694
6,587
16.8
7,394
10,392
9,619
8.0
P / BV (x)
EV / E (x)
14.8
12.8
Bajaj Auto Ra ti ng
Accumulate
Pri ce (Rs )
2,730
Ta rget Pri ce (Rs )
3,045
M/Ca p (Rs bn)
789.8
Sha res o/s (m)
289.4
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY17
FY18E
FY19E
217,667
238,282
268,862
44,223
46,507
53,866
20.3
19.5
20.0
38,276
40,137
46,009
132.3
138.7
159.0
(2.6) 4.9
14.6
RoE (%)
25.3
22.1
22.3
PE (x)
20.6
19.7
17.2
P / BV (x)
4.6
4.1
3.6
EV / E (x)
17.8
16.9
14.5
July 11, 2017 With a 10.7% decline reported in its total volumes for the quarter, we expect 9.7% YoY revenue decline for BJAUT during Q1FY18. Our EBITDA margin expectation is 19.5%; lower 100bps YoY but higher 100bps QoQ. We expect BJAUT’s adjusted profit in Q1FY18e to fall ~12% YoY to Rs8.62bn. Net Sales
Q1
FY18E
51,901
Q1
FY17
57,480
YoY gr. (%)
(9.7)
Q4
12M
12M
FY17
FY18E
FY17
48,973 238,282 217,667
EBITDA
10,105
11,763
(14.1)
9,060
Margin (%)
19.5
20.5
(100)bps
18.5
Reported PAT
8,619
9,784
(11.9)
8,018
40,137
38,276
4.9
PAT (Excl. Ex Items )
8,619
9,784
(11.9)
8,018
40,137
38,276
4.9
Real. / Unit (Rs)
57,302
56,735
1.0
61,006
59,221
58,303
1.6
GM / Unit (Rs )
18,986
18,952
0.2
20,023
19,293
19,483
(1.0)
EBITDA / Unit (Rs )
11,374
11,826
(3.8)
11,503
11,755
12,063
(2.6)
9,702
9,836
(1.4)
10,180
10,145
10,441
(2.8) 46,507
YoY gr. (%)
9.5
44,223
5.2
19.5 20.3
(80)bps
Operating Metrics
Profit / Unit (Rs)
26
Apr‐Jun 2017 Earnings Preview
Bharat Forge Ra ti ng
Accumulate
Pri ce (Rs )
1,122
Ta rget Pri ce (Rs )
1,265
M/Ca p (Rs bn)
261.2
Sha res o/s (m)
232.8
With recovery in user industries like Oil & Gas and US truck sales, we expect shipment tonnage to rise by ~9% YoY (on lower base) in Q1FY18. Overall revenue for Bharat Forge is expected to increase by 17.8% YoY to Rs10.7bn and EBITDA margin is expected at 29% (lower 120bps YoY, higher 60bps QoQ). We expect net profit to grow a strong 37.4% YoY to Rs1.68bn in Q1FY18. Quarterly Table (Rs m) Q1
FY18E
10,658
Q1
FY17
9,044
3,096
2,444
26.7
3,200
29.0
27.0
202 bps
28.4
Reported PAT
1,677
1,221
37.4
2,075
7,825
7,037
11.2
PAT (Excl. Ex Items)
1,677
1,221
37.4
1,820
7,825
6,138
27.5
53,517
49,098
9.0
55,189
208,309
186,184
11.9
8.1
203,968
216,198
207,573
4.2
Y/e March
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
63,962
EBITDA
73,528
FY19E
83,730
12,511
15,324
17,912
19.6
20.8
21.4
6,138
7,825
9,814
26.4
33.6
42.2
(6.5) 27.5
25.4
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
Net Sales
EBITDA
Margin (%)
YoY gr. (%)
17.8
Q4
12M
12M
FY17
FY18E
FY17
11,257 73,528 63,962
15,324
YoY gr. (%)
15.0
12,511
22.5
20.8 19.6
128 bps
Standalone Operating Metrics
Sales tonnage (MT)
RoE (%)
16.3
17.9
19.7
Real. / ton (Rs)
199,157
184,207
PE (x)
42.5
33.4
26.6
Gr. Mrg./Ton (Rs)
129,452
120,911
7.1
132,333
140,528
136,646
2.8
57,852
49,780
16.2
57,974
62,623
57,610
8.7
31,344
24,860
26.1
32,779
34,055
29,366
16.0 P / BV (x)
6.3
5.7
4.9
EBITDA/Ton (Rs)
EV / E (x)
22.5
17.9
15.2
Adj. PAT/Ton (Rs)
CEAT Ceat is expected to report a 3% YoY growth in its sales tonnage in Q1FY18. Expecting realisation decline of 0.5% YoY, we anticipate the standalone revenues to grow 2.5% YoY to Rs14.9bn. Higher price rubber inventory will again impact standalone EBITDA margin, which is likely to be lower 330bps YoY and 20bps QoQ to 9.4%, with EBITDA declining 24.2% YoY. We expect profit decline of 27.2% YoY to Rs707m. Ra ti ng
Accumulate
Pri ce (Rs )
1,882
Ta rget Pri ce (Rs )
1,972
M/Ca p (Rs bn)
76.1
Sha res o/s (m)
40.5
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
FY19E
67,619
77,113
6,568
7,634
8,892
11.4
11.3
11.5
3,612
4,393
5,318
89.3
108.6
131.5
(17.5) 21.7
21.0
Quarterly Table (Rs m) Y/e March
Net Sales
Q1
FY18E
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
14,927
14,558
2.5
14,507
67,619
57,665
17.3
1,406
1,855
(24.2)
1,387
7,634
6,568
16.2
9.4
12.7
(332)bps
9.6
11.3 11.4
(10)bps
RoE (%)
16.1
16.8
17.5
EBITDA
PE (x)
21.1
17.3
14.3
Margin (%)
3.2
2.7
2.3
Reported PAT
707
965
(26.7)
702
4,393
3,612
21.7
9.3
PAT (Excl. Ex Items)
707
971
(27.2)
789
4,393
3,612
21.7
P / BV (x)
EV / E (x)
FY17
57,665
July 11, 2017 12.9
11.0
27
Apr‐Jun 2017 Earnings Preview
Eicher Motors Ra ti ng
Accumulate
Pri ce (Rs )
27,929
Ta rget Pri ce (Rs )
30,893
M/Ca p (Rs bn)
758.5
Sha res o/s (m)
27.2
Standalone Quarterly Table (Rs m) Key Figures (Rs m) ‐ Consolidated Y/e March
FY17
FY18E
FY19E
Net Sa l es
70,334
88,629
106,196
EBITDA
21,740
27,121
32,854
30.9
30.6
30.9
16,671
21,590
26,095
Margin (%)
PAT
EPS (Rs )
Growth (%)
On a standalone basis, Royal Enfield volumes have grown by 24.8% YoY to 183,998 units. VECV has witnessed a YoY decline in volumes of ~28%. We expect EIM to report standalone revenue growth of 25.8% YoY to Rs19.5bn, with an EBITDA margin of 31 % (up 80bps YoY) and an adjusted profit of Rs4.6bn (up 24.6% YoY). Q1
FY18E
19,573
Q1
FY17
15,557
6,076
4,702
29.2
5,848
27,121
21,740
24.8
31.0
30.2
82 bps
31.0
30.6
30.9
(31)bps
Reported PAT
4,606
3,763
22.4
4,594
21,590
16,671
29.5
PAT (Excl . Ex Items )
4,606
3,763
22.4
4,594
21,590
16,671
29.5
Y/e March
Net Sa les
EBITDA
Margin (%)
613.8
794.9
960.8
24.6
29.5
20.9
37.1
35.2
33.3
Royal Enfi el d vol ume 183,998
Tota l CV s a les (uni ts
RoE (%)
PE (x)
45.5
35.1
29.1
P / BV (x)
14.2
11.0
8.6
EV / E (x)
34.9
27.9
22.9
YoY gr. (%)
25.8
Q4
12M
12M
FY17
FY18E
FY17
18,881 88,629 70,334
YoY gr. (%)
26.0
Operating Metrics
147,483
24.8
178,228
816,450
666,490
22.5
11,583
16,071
(27.9)
16,606
64,106
57,131
12.2
Tota l volumes (uni ts 195,581
163,554
19.6
194,834
880,556
723,621
21.7
30.8
44 bps
31.4
31.0
31.3
(38)bps
St. EBITDA Mrg. (%)
31.2
Exide Industries After the slight decline in Q4FY17, we expect Exide Industries to record an 8% YoY increase in its revenues during Q1FY18e to Rs21.7bn. Our EBITDA margin expectation is ~15%. EBITDA rise is expected at 2.5% YoY. Net profit is expected to grow a decent 6.1% YoY to Rs2.1bn. Ra ti ng
Accumulate
Pri ce (Rs )
229
Ta rget Pri ce (Rs )
257
M/Ca p (Rs bn)
194.8
Sha res o/s (m)
850.0
Key Figures (Rs m) Y/e March
FY18E
FY19E
Net Sa l es
76,144
88,590
102,466
EBITDA
11,064
12,896
15,021
14.5
14.6
14.7
6,888
8,219
9,633
8.1
9.7
11.3
10.6
19.3
17.2
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
14.7
15.8
16.4
PE (x)
28.3
23.7
20.2
4.0
3.5
3.1
P / BV (x)
EV / E (x)
FY17
July 11, 2017 17.7
15.0
12.7
Quarterly Table (Rs m) Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
21,720
Q1
FY17
20,111
YoY gr. (%)
8.0
Q4
12M
12M
FY17
FY18E
FY17
19,757 88,590 76,144
YoY gr. (%)
16.3
3,228
3,150
2.5
2,618
12,896
11,064
16.6
14.9
15.7
(80)bps
13.3
14.6
14.5
3 bps
Reported PAT
2,079
1,961
6.1
1,648
8,219
6,888
19.3
PAT (Excl. Ex Items)
2,079
1,961
6.1
1,648
8,219
6,888
19.3
28
Apr‐Jun 2017 Earnings Preview
Hero Moto Corp Ra ti ng
Accumulate
Pri ce (Rs )
3,733
Ta rget Pri ce (Rs )
4,106
M/Ca p (Rs bn)
745.4
Sha res o/s (m)
199.7
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
Net Sa l es
HMCL has reported a 6% YoY increase in volumes in Q1FY18, after the fall in the previous two quarters. Expecting realisations to be higher by 1% YoY, revenue would grow by 7% YoY. Benefits of its cost reduction programme should help margins but owing to the higher price raw material inventory, EBITDA margin is expected to be at 16.1%, lower 50bps YoY but higher 230bps QoQ. We expect profit to grow by 4.4% YoY to Rs9.2bn. FY18E
FY19E
Net Sales
Q1
FY18E
79,159
Q1
FY17
73,989
EBITDA
12,761
12,301
3.7
9,576
16.1
16.6
(50)bps
13.8
Reported PAT
9,220
8,831
4.4
7,178
38,831
33,771
15.0
PAT (Excl. Ex Items )
9,220
8,831
4.4
7,178
38,831
33,771
15.0
Y/e March
YoY gr. (%)
7.0
Q4
12M
12M
FY17
FY18E
FY17
69,152 317,114 284,750
YoY gr. (%)
11.4
284,750
317,114
338,650
46,348
53,344
57,439
16.3
16.8
17.0
33,771
38,831
41,947
169.1
194.4
210.0
6.9
15.0
8.0
Operating Metrics
RoE (%)
37.4
35.1
32.3
Real. / Unit (Rs)
42,182
41,765
1.0
41,862
43,014
42,009
2.4
PE (x)
22.1
19.2
17.8
GM / Unit (Rs )
14,018
13,942
0.5
13,436
14,379
14,201
1.3
P / BV (x)
7.4
6.2
5.3
EBITDA / Unit (Rs )
6,900
7,048
(2.1)
5,904
7,357
6,955
5.8
EV / E (x)
16.1
14.0
12.9
Profit / Unit (Rs)
4,986
5,060
(1.5)
4,426
5,356
5,068
5.7 EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
Mahindra & Mahindra Ra ti ng
Accumulate
Pri ce (Rs )
1,368
Ta rget Pri ce (Rs )
Margin (%)
46,348
15.1
16.8 16.3
53,344
54 bps
M&M’s overall volumes are higher 2.7% YoY, where tractors have grown 13.3% YoY during Q1FY18. Resultantly, we expect M&M’s standalone revenues to increase ~3% YoY to Rs113.8bn and EBITDA margin to be at 11.3%. Adjusted profit is expected to remain almost flat YoY at Rs8.8bn in Q1FY18e. 1,478
M/Ca p (Rs bn)
810.6
Sha res o/s (m)
592.6
Quarterly Table (Rs m) ‐ Standalone Y/e March
Net Sa l es
FY17
FY18E
FY19E
437,854
491,312
554,224
48,054
56,893
65,248
11.0
11.6
11.8
34,072
44,412
51,071
57.5
74.9
86.2
8.1
30.3
15.0
RoE (%)
14.7
17.0
17.2
PE (x)
18.0
13.8
12.0
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
Q1
FY18E
113,804
Q1
FY17
110,408
12,891
12,855
0.3
10,385
11.3
11.6
(32)bps
9.3
Reported PAT
8,843
9,552
(7.4)
8,252
44,412
39,557
12.3
PAT (Excl. Ex Items )
8,843
8,870
(0.3)
7,549
44,412
34,072
30.3
Real. / Vehicle (Rs )
555,057
552,893
0.4
587,309
569,826
561,147
1.5
GM / Vehicle (Rs)
Y/e March
Key Figures (Rs m) ‐ Standalone P / BV (x)
3.3
2.9
2.6
EV / E (x)
16.9
14.3
12.3
Net Sales
EBITDA
Margin (%)
YoY gr. (%)
3.1
Q4
12M
12M
FY17
FY18E
FY17
112,251 491,312 437,854
56,893
YoY gr. (%)
12.2
48,054
18.4
11.6 11.0
60 bps
Operating Metrics
151,768
152,805
(0.7)
154,434
160,584
156,165
2.8
EBITDA / Vehicle (Rs)
63,671
65,219
(2.4)
49,838
66,889
62,439
7.1
Profit / Vehicle (Rs )
43,679
44,998
(2.9)
34,779
52,216
44,343
17.8 July 11, 2017 29
Apr‐Jun 2017 Earnings Preview
Maruti Suzuki Ra ti ng
Accumulate
Pri ce (Rs )
7,435
Ta rget Pri ce (Rs )
7,903
M/Ca p (Rs bn)
2,245.3
Sha res o/s (m)
302.0
MSIL’s volumes have grown 13.2% YoY during Q1FY18. With average realizations expected to be higher 3% YoY, MSIL is expected to record a 16.5% YoY revenue growth to Rs173.9bn. With higher raw material cost expected in Q1FY18e, EBITDA margin is likely to be lower 80bps YoY at 14%. We expect 12.2% YoY profit growth to ~Rs16.7bn. Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Q1
FY18E
173,924
Q1
FY17
149,273
24,357
22,157
9.9
25,607
14.0
14.8
(84)bps
14.0
Reported PAT
16,675
14,862
12.2
17,090
86,615
73,377
18.0
PAT (Excl. Ex Items)
16,675
14,862
12.2
17,090
86,615
73,377
18.0
Y/e March
Net Sa l es
680,348
803,821
927,586
Net Sales
EBITDA
102,494
119,256
136,122
EBITDA
Margin (%)
PAT
15.1
14.8
14.7
73,377
86,615
99,441
243.0
286.8
329.3
EPS (Rs )
Growth (%)
Margin (%)
YoY gr. Q4
12M
12M
(%)
FY17
FY18E
FY17
16.5 183,334 803,821 680,348
119,256
YoY gr. (%)
18.1
102,494
16.4
14.8 15.1
(23)bps
36.4
18.0
14.8
RoE (%)
22.2
22.1
21.8
Real/ Unit (Rs )
433,188
420,571
3.0
434,447
454,273
426,554
6.5
PE (x)
30.6
25.9
22.6
Net Real./Unit (Rs )
134,442
137,810
(2.4)
134,314
142,206
135,810
4.7
P / BV (x)
6.2
5.3
4.6
EBITDA / Unit (Rs)
61,731
63,589
(2.9)
61,787
68,499
65,341
4.8
EV / E (x)
22.0
18.9
16.5
Profit / Unit (Rs)
42,260
42,653
(0.9)
41,236
49,751
46,778
6.4 Motherson Sumi Systems Ra ti ng
Accumulate
Pri ce (Rs )
311
Ta rget Pri ce (Rs )
Operating Metrics
We expect MSS to record a 12.5% YoY revenue growth to Rs117.5bn. We expect an EBITDA margin of 9.5% and EBITDA growth of 18.9% YoY. Adjusted profit growth is expected at 34.2% YoY to Rs4.2bn. Standalone revenue growth is expected at ~15% YoY, with an EBITDA margin of 18% and adjusted profit growth at 18.2% YoY. 474
M/Ca p (Rs bn)
436.6
Sha res o/s (m)
1,403.5
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY17
FY18E
FY19E
424,752
471,566
533,317
42,665
52,104
59,236
10.0
11.0
11.1
16,074
22,130
26,624
11.5
15.8
19.0
22.4
37.7
20.3
RoE (%)
25.4
24.6
24.9
PE (x)
27.2
19.7
16.4
P / BV (x)
5.3
4.5
3.7
EV / E (x)
11.5
8.4
7.1
Y/e March
Net Sales
EBITDA
Margi n (%)
Q1
FY18E
117,542
Q1
FY17
104,504
YoY gr. (%)
12.5
Q4
12M
12M
FY17
FY18E
FY17
112,839 471,566 424,752
YoY gr. (%)
11.0
11,181
9,404
18.9
12,543
52,104
42,665
22.1
9.5
9.0
51 bps
11.1
11.0
10.0
100 bps
Reported PAT
4,192
3,026
38.5
7,059
22,130
15,543
42.4
PAT (Excl. Ex Items )
4,192
3,124
34.2
7,948
22,130
16,074
37.7
Stnd. EBITDA Margin
18.0
18.4
(39)bps
19.9
19.3
19.7
(36)bps
SMR EBITDA Margin
9.5
9.1
41 bps
12.9
11.0
10.9
14 bps
SMP EBITDA Margin
8.0
6.9
107 bps
8.1
8.5
7.3
117 bps
Operating Metrics
July 11, 2017 30
Apr‐Jun 2017 Earnings Preview
Ramkrishna Forgings Ra ti ng
BUY
Pri ce (Rs )
515
Ta rget Pri ce (Rs )
655
M/Ca p (Rs bn)
14.8
Sha res o/s (m)
28.7
With revival in the North America class 8 truck orders, we expect RMKF’s Q4FY17 growth to continue in Q1FY18e with sales tonnage increasing 10% YoY. Overall revenue is expected to be higher 20.5% YoY to ~Rs2.6bn. EBITDA margin is expected to be at 19% (down 20bps YoY and 50bps QoQ), with EBITDA growth at 19% YoY. Adjusted profit is likely to grow a strong 64% YoY to Rs102m. Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sa l es
8,755
11,698
14,397
EBITDA
1,645
2,358
3,165
18.8
20.2
22.0
PAT
190
631
1,170
EPS (Rs )
6.6
22.0
40.8
(65.3) 231.6
85.5
Margin (%)
Growth (%)
Y/e March
Net Sales
4.0
12.1
19.4
EBITDA
77.6
23.4
12.6
Margin (%)
RoE (%)
PE (x)
Quarterly Table (Rs m) P / BV (x)
3.0
2.7
2.2
EV / E (x)
14.1
9.7
7.1
Q1
FY18E
2,625
Q1
FY17
2,178
YoY gr. (%)
20.5
Q4
12M
12M
FY17
FY18E
FY17
2,887 11,698 8,755
YoY gr. (%)
33.6
498
418
19.1
564
2,358
1,645
43.3
19.0
19.2
(22)bps
19.5
20.2
18.8
136 bps
Reported PAT
102
62
64.2
141
631
190
231.6
PAT (Excl. Ex Items)
102
62
64.2
141
631
190
231.6
Tata Motors Ra ti ng
Accumulate
Pri ce (Rs )
447
Ta rget Pri ce (Rs )
519
M/Ca p (Rs bn)
1,517.2
Sha res o/s (m)
3,396.1
Net Sa l es
FY17
FY18E
FY19E
2,696,925 3,119,131 3,563,959
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
Quarterly Table (Rs m) Y/e March
Key Figures (Rs m) ‐ Consolidated Y/e March
On a standalone basis, M&HCV volumes have declined by ~34% YoY, whereas the LCV segment was lower 6.2% YoY, while PV segment has grown ~9% YoY. Overall volume de‐growth in the standalone entity has been 11.3% YoY. JLR’s Q1FY18 volumes are expected to be higher 3.1% YoY. We expect TTMT’s consolidated adjusted profit to decline a sharp 41% YoY to ~Rs15.1bn. 369,124
435,076
526,332
13.7
13.9
14.8
102,499
134,622
171,931
30.2
39.6
50.6
(28.6) 31.3
27.7
Net Sales
EBITDA
Margin (%)
Q1
FY18E
585,120
Q1
FY17
658,950
YoY gr. (%)
(11.2)
77,296
92,909
(16.8)
Q4
12M
12M
FY17
FY18E
FY17
772,172 3,119,131 2,696,925
117,875
435,076
YoY gr. (%)
15.7
369,124
17.9
13.9 13.7
26 bps
13.2
14.1
(89)bps
15.3
Reported PAT
15,073
22,364
(32.6)
42,705
134,622
74,544
80.6
PAT (Excl. Ex Items)
15,073
25,581
(41.1)
43,314
134,622
102,499
31.3
109,691
123,729
(11.3)
151,068
588,183
542,323
8.5
0.1
6.7
(656)bps
4.1
5.0
3.8
112 bps
138,535
134,334
3.1
175,121
706,566
600,806
17.6
(135)bps 14.5 13.0 12.1 86 bps
Operating Metrics
Stand. Sales (units)
RoE (%)
15.0
20.8
21.5
PE (x)
14.8
11.3
8.8
Total JLR Vol. (units)
P / BV (x)
2.6
2.1
1.7
EV / E (x)
5.2
4.4
3.6
JLR EBITDA margin ‐ 12.5 13.8 IFRS (%)
Stand. EBITDA Marg. (%
July 11, 2017 31
Apr‐Jun 2017 Earnings Preview
TVS Motors Ra ti ng
Reduce
Pri ce (Rs )
569
Ta rget Pri ce (Rs )
409
M/Ca p (Rs bn)
270.5
Sha res o/s (m)
475.1
During Q1FY18, TVS Motors has recorded volume growth of 11.7% YoY. We expect revenues to be higher 14% YoY at Rs32.8bn. EBITDA margin is expected at 7.2% (higher 20bps YoY), leading to EBITDA rising 17.6% YoY to ~Rs2.4bn. Adjusted profit growth is expected to be 15.5% YoY to Rs1.4bn. Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Y/e March
FY17
Net Sa l es
FY18E
FY19E
121,353
140,531
158,524
8,571
11,211
14,222
7.1
8.0
9.0
5,581
7,294
9,607
EBITDA
Margin (%)
PAT
EPS (Rs )
11.7
15.4
20.2
10.3
30.7
31.7
RoE (%)
25.7
27.0
28.3
PE (x)
48.5
37.1
28.2
Growth (%)
P / BV (x)
11.2
9.0
7.1
EV / E (x)
32.8
24.9
19.4
Net Sales
EBITDA
Margin (%)
Q1
FY18E
32,847
Q1
FY17
28,809
YoY gr. (%)
14.0
Q4
12M
12M
FY17
FY18E
FY17
28,445 140,531 121,353
2,356
2,004
17.6
1,615
7.2
7.0
22 bps
5.7
11,211
YoY gr. (%)
15.8
8,571
30.8
8.0 7.1
92 bps
Reported PAT
1,400
1,213
15.5
1,268
7,294
5,581
30.7
PAT (Excl. Ex Items )
1,400
1,213
15.5
1,268
7,294
5,581
30.7
Real. / Unit (Rs)
40,526
39,732
2.0
41,704
42,601
40,974
4.0
Gr. Marg./Unit (Rs)
Operating Metrics
11,159
11,012
1.3
10,494
11,902
11,213
6.1
EBITDA / Vehicle (Rs )
2,938
2,791
5.3
2,393
3,436
2,928
17.3
Profit / Vehicle (Rs )
1,745
1,689
3.3
1,878
2,236
1,907
17.3 Wabco India Ra ti ng
Accumulate
Pri ce (Rs )
5,665
Ta rget Pri ce (Rs )
Given the fall in the M&HCV industry in Q1FY18, we expect WIL’s revenues to decline ~4% YoY to Rs5.67bn. Our EBITDA margin expectation is at 15.5% (down 220bps YoY but higher 210bps QoQ). EBITDA de‐growth is expected at 15.8% YoY. Q1FY18e Net Profit is expected to fall ~17% YoY to Rs614m. 6,005
M/Ca p (Rs bn)
107.4
Sha res o/s (m)
19.0
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
FY18E
FY19E
20,675
23,100
27,908
3,462
3,962
4,954
16.7
17.2
17.8
2,333
2,771
3,452
123.0
146.1
182.0
14.7
18.8
24.6
RoE (%)
20.1
19.9
20.5
PE (x)
46.1
38.8
31.1
P / BV (x)
8.5
7.1
5.8
EV / E (x)
30.3
26.2
20.7
Growth (%)
FY17
July 11, 2017 Quarterly Table (Rs m) Y/e March
Q1
FY18E
Net Sales
5,666
5,897
(3.9)
5,769
23,100
20,675
11.7
879
1,044
(15.8)
776
3,962
3,462
14.4
17.2 16.7
41 bps
EBITDA
Margin (%)
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
15.5
17.7
(219)bps
13.4
Reported PAT
614
739
(16.9)
496
2,771
2,333
18.8
PAT (Excl. Ex Items)
614
739
(16.9)
496
2,771
2,333
18.8
32
Apr‐Jun 2017 Earnings Preview
R Sreesankar [email protected] +91‐22‐6632 2214 Banking & Financial Services Pritesh Bumb [email protected] +91‐22‐6632 2232 Earnings for our universe of companies under coverage is likely to see some improvement mainly led by PSBs on comparatively lower credit costs and recovery in NII from lower base. Among the private sector banks earnings will continue to remain under pressure for those focussed on corporate leading to lower growth trends in overall private bank earnings. Slippages for all banks should be stable and should not see significant deterioration in asset quality levels. Retail focused banks should see recovery in loan growth trends helping operating performance. Lower credit offtake has been an issue but commentaries and RBI’s data suggest some uptick in loan growth trends which is positive for industry. In NBFCs, AUM growth to remain slower mainly in vehicle finance companies ahead of uncertainty in GST and some pre‐buying in Q4FY17, but spreads should hold up as benefit continues to accrue to NBFCs on re pricing at lower funding cost, while asset quality trends to be stable helping earnings stability for NBFCs. Vidhi Shah [email protected] +91‐22‐6632 2258 Top picks HDFC Bank State Bank of India IndusInd Bank 
Core profitability still in recovery mode: We expect core profitability to be mixed and under recovery mode among banks but would see better NII trends on lower base and recovery in loan growth especially that of large PSBs. Margin headwinds are likely to remain especially for corporate banks on back of aggressive MCLR cuts which have re priced loans lower at faster pace and liability franchise re pricing to slow down, but we are likely to see lower interest reversals. Fees/other income ex‐treasury should be also lower comparatively as FY17 had seen higher stake sale of investments and was slightly better in H1FY17 v/s H2FY17. Opex should be broadly under control for the sector. 
Fresh Impairment to be lower but credit cost to remain at similar levels of last few quarters: Overall fresh slippages for sector should be lower and should be mostly from the watch list and restructured book of banks. We do not expect much of slippages outside the respective watch list which would be a confidence factor. While impairment to be stable, we expect credit cost for most corporate banks to be at similar levels witnessed in last few quarters as banks improve overall PCR and RBI’s stance to improve provisioning on large stress cases. Overall asset quality should see stable scenario as upgrades/recoveries to be slower. 
Loan growth to be led by retail assets: Most banks’ loan growth will be supported by retail assets growth with private banks leading, while corporate loan growth will continue to remain subdued. NBFCs will continue to showcase stable trends in AUMs growth but Q1 generally remains a seasonally weak quarter for most NBFCs but YoY should see improved trends. Guidance on loan growth trajectory especially for retail assets will be keenly watched as systemic loan data suggests slowdown in housing/auto loans for system. ICICI Bank
Yes Bank L&T Finance Holding Capital First July 11, 2017 33
Apr‐Jun 2017 Earnings Preview
Q4FY17 Preview: 
Private Banks – Loan growth remains mixed among private sector banks but will continue to deliver much above industry growth. Private banks focused on retail & SME should continue improved trends, while Axis/ICICIBC/JKBK will continue to showcase slower loan growth. NII for private banks is expected to grow at 17% YoY (2.5% QoQ) as margins headwinds remain owing to competitive pressure & MCLR cut effects on portfolio. Also, most private banks have seen weaker fee trends in past few quarters and we expect fees to recover gradually, while opex is likely to be under control for most banks. Credit cost will remain high for corporate banks and retail banks should showcase moderate credit costs. We expect asset quality for ICICI/Axis to remain under pressure. 
Public Sector Banks ‐ PSBs are unlikely to see support from higher treasury gains like in 2HFY17 on back of sharp drop in yields, but is expected to see treasury gains from the 40bps fall in benchmark GSec in 1QFY18. In addition, NII growth will be decent on back of lower interest reversals unlike in previous quarters and recovery in loan growth marginally keeping operating profit stable. But earnings to remain under pressure as credit costs will continue to remain high as most bank improve their PCR and some ageing of NPAs continue. Some PSBs like BOB/PNB may not face large provisioning and should report comparatively better earnings. SBI will report merged numbers which will be not comparable and should see pressure but on standalone basis SBI should report stable set of numbers. 
NBFCs – AUMs will be following stable trends as Q1 generally remains seasonally a slower period, but collection efforts to continue for most NBFCs post facing headwinds post demonetisation. Spreads/margins for most NBFCs to be stable as lower funding cost benefit to continue to flow in but competitive pressure have compelled NBFCs to pass on lowering rate benefits. Under our coverage, we expect NBFCs like SHTF/MMFS to benefit from growth in select segments, while credit cost to remain high for both. LTFH/CAFL will continue with robust earnings performance and should see further improvement in return ration. For HDFC/LICHF we expect stable trends in growth and profitability. Our key stock ideas & rating changes: We have largely retained our top picks in the sector as retail banks will continue to outperform. We have also retained our thought process on turnaround growth stories like LTFH & CAFL which could continue their robust operating performance. We believe ICICIBC could be outlier as higher clarity on resolutions in large accounts come in and improving profitability & share in retail will help bank’s recovery in margin trajectory. Merger of associates in SBIN opens some uncertainty in operating performance hence we will closely watch key developments. But we believe SBIN will also benefit from lower stress on balance sheet and resolutions undertaken in different mechanisms. July 11, 2017 34
Apr‐Jun 2017 Earnings Preview
We believe Federal & South Indian Bank should start continue improvement in the operating performance and improve return ratios post seeing large consolidation in balance sheet growth in last three years. Valuation Metrics for our coverage Axis Old Rating New Rating CMP (Rs)
Old PT New PT (Rs)
(Rs)
P/E (x) P/B (x) Upside
(%)
FY18E FY19E
FY18E
FY19E
REDUCE REDUCE 1,222 510 480 495 (2.9)
17.1 12.5
2.4
2.0
HDFCB ICICIB BUY BUY BUY BUY 4,315 1,676 1,869 291 1,675 380 1,940 15.7 380 30.4 24.3 9.7 20.3
8.1
4.4
1.5
3.7
1.3
IIB BUY BUY 934 1,560 1,595 1,595 2.2 25.8 19.8
4.1
3.5
Yes BUY BUY 692 1,513 1,868 1,850 22.3 15.6 12.7
2.8
2.4
Kotak* 1,842 968 1,000 1,086 12.2 24.0 19.0
5.0
4.1
BUY BUY 222 115 125 138 20.5 17.5 12.9
2.0
1.8
J&K Bank SIB REDUCE BUY REDUCE BUY 48 87 52 29 77 37 77 (11.5)
37 28.5 17.5 8.9
1.4
1.1
9.7 7.4
1.2
1.0
IDFC Bank BUY BUY 222 65 72 72 10.4 18.0 14.4
1.4
1.3
384 167 190 190 14.0 12.0 9.1
1.4
1.2
160 149 124 124 (16.9)
23.4 7.9
1.4
1.0
326 153 160 160 4.4 11.7 6.3
1.8
1.3
2,465 286 108 157 356 168 356 24.7 168 7.1 10.1 8.1 7.4
6.4
1.3
1.2
1.2
0.8
70 717 856 856 19.4 21.3 15.6
2.7
2.4
Federal BOB BOI PNB SBI* Union Capital First LTFH ACCUMULATE ACCUMULATE ACCUMULATE ACCUMULATE REDUCE REDUCE ACCUMULATE ACCUMULATE BUY REDUCE BUY ACCUMULATE ACCUMULATE BUY BUY BUY 272 150 210 210 40.5 21.9 16.1
3.3
2.8
HDFC ACCUMULATE ACCUMULATE 2,611 1,639 1,690 1,690 3.1 15.0 13.0
3.3
2.8
LICHF ACCUMULATE ACCUMULATE MMFS STFC 375 743 725 725 (2.4)
16.0 13.9
2.8
2.4
ACCUMULATE 208 366 375 375 2.3 16.9 13.6
3.5
3.1
ACCUMULATE ACCUMULATE 239 1,056 1,145 1,145 8.5 15.6 12.8
2.2
2.0
BUY Source: Company Data, PL Research MCap (Rs B)
July 11, 2017 Notes – *Kotak & SBI valuation on S’lone book 35
Apr‐Jun 2017 Earnings Preview
G‐Sec yields pulled up by 40‐50bps from lows see in December post RBI Gsec yields have seen sharper decline across tenures from last year
pause on repo rates & shift to neutral stance despite recent hardening 10Yr G‐Sec Yield
9.5
3QFY17
7.0
9.0
6.8
8.5
6.6
8.0
6.4
7.5
6.2
7.0
6.0
6.5
5.8
Jun‐11
Sep‐11
Dec‐11
Mar‐12
Jun‐12
Sep‐12
Dec‐12
Mar‐13
Jun‐13
Sep‐13
Dec‐13
Mar‐14
Jun‐14
Sep‐14
Dec‐14
Mar‐15
Jun‐15
Sep‐15
Dec‐15
Mar‐16
Jun‐16
Sep‐16
Dec‐16
Mar‐17
Jun‐17
6.0
Source: Bloomberg, PL Research 4QFY17
1QFY18
Current
5.6
5.4
3Month
1Year
5Year
10Year
Source: Bloomberg, PL Research RBI pauses on Repo rate cuts with neutral stance; we will continue to witness the same in April policy Jun‐16
Dec‐16
Jun‐17
Jun‐15
Dec‐15
Dec‐13
Jun‐14
Dec‐14
Dec‐11
Jun‐12
Dec‐12
Jun‐13
Jun‐10
Dec‐10
Jun‐11
Jun‐09
Dec‐09
Jun‐07
Dec‐07
Jun‐08
Dec‐08
Jun‐06
Dec‐06
(%)
Movement in Repo Rate
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
Source: RBI, Bloomberg, PL Research Most banks parking excess liquidity in reverse repos Jun‐17
May‐17
Apr‐17
Var R‐Repo
Net OMOs
Mar‐17
Feb‐17
Jan‐17
Dec‐16
Var Repo
MSS
Nov‐16
Oct‐16
Sep‐16
R‐Repo
SLF
Jun‐16
Rs Trillion
Mar‐16
Apr‐16
May‐16
Jun‐16
Jul‐16
Aug‐16
Sep‐16
Oct‐16
Nov‐16
Dec‐16
Jan‐17
Feb‐17
Mar‐17
Apr‐17
May‐17
Jun‐17
Source: RBI, PL Research Repo
MSF
12 8 4 ‐
(4)
(8)
(12)
(16)
(20)
(24)
(28)
Aug‐16
Net Liquidity (Rs Bn)
3,500 3,000 2,500 2,000 1,500 1,000 500 ‐
(500)
(1,000)
(1,500)
(2,000)
(2,500)
(3,000)
Jul‐16
Liquidity remains surplus for the system Source: RBI, PL Research July 11, 2017 36
Apr‐Jun 2017 Earnings Preview
CP rates have remained lower despite longer tenure paper hardening in recent months FIMMDA 3 MTH CP
FIMMDA 6 MTH CP
Dec‐12
Feb‐13
Apr‐13
Jun‐13
Aug‐13
Oct‐13
Dec‐13
Feb‐14
Apr‐14
Jun‐14
Aug‐14
Oct‐14
Dec‐14
Feb‐15
Apr‐15
Jun‐15
Aug‐15
Oct‐15
Dec‐15
Feb‐16
Apr‐16
Jun‐16
Aug‐16
Oct‐16
Dec‐16
Feb‐17
Apr‐17
Jun‐17
12.5
12.0
11.5
11.0
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
Source: Bloomberg, PL Research ‘AAA’ Corp bond yields inch up in line with G‐sec yields FIMMDA 3 YR AAA
...while ‘A’ rated corporate bond rates see sharper rebound FIMMDA 5 YR AAA
FIMMDA 3 YR A
10.5
12.0
10.0
11.5
9.5
11.0
9.0
FIMMDA 5 YR A
10.5
8.5
10.0
8.0
7.0
9.0
Source: Bloomberg, PL Research Dec‐12
Feb‐13
Apr‐13
Jun‐13
Aug‐13
Oct‐13
Dec‐13
Feb‐14
Apr‐14
Jun‐14
Aug‐14
Oct‐14
Dec‐14
Feb‐15
Apr‐15
Jun‐15
Aug‐15
Oct‐15
Dec‐15
Feb‐16
Apr‐16
Jun‐16
Aug‐16
Oct‐16
Dec‐16
Feb‐17
Apr‐17
Jun‐17
9.5
Dec‐12
Feb‐13
Apr‐13
Jun‐13
Aug‐13
Oct‐13
Dec‐13
Feb‐14
Apr‐14
Jun‐14
Aug‐14
Oct‐14
Dec‐14
Feb‐15
Apr‐15
Jun‐15
Aug‐15
Oct‐15
Dec‐15
Feb‐16
Apr‐16
Jun‐16
Aug‐16
Oct‐16
Dec‐16
Feb‐17
Apr‐17
Jun‐17
7.5
Source: Bloomberg, PL Research Credit growth for the system continues to be anaemic at ~4%, while deposits growth see some decline on back of cash requirement by public Deposit growth
Credit growth
Jun‐10
Sep‐10
Dec‐10
Mar‐11
Jun‐11
Sep‐11
Dec‐11
Mar‐12
Jun‐12
Sep‐12
Dec‐12
Mar‐13
Jun‐13
Sep‐13
Dec‐13
Mar‐14
Jun‐14
Sep‐14
Dec‐14
Mar‐15
Jun‐15
Sep‐15
Dec‐15
Mar‐16
Jun‐16
Sep‐16
Dec‐16
Mar‐17
Jun‐17
25%
23%
21%
19%
17%
15%
13%
11%
9%
7%
5%
3%
Source: RBI, PL Research July 11, 2017 37
Apr‐Jun 2017 Earnings Preview
All Banks have cut deposit rates across buckets more to follow Cut in peak deposit rate 0‐3M
3‐9M 9‐15M 15‐36M
>36M
HDFC Bank 0.00%
0.00% 0.00% ‐0.25%
‐0.25%
Axis Bank 0.00%
0.00% 0.00% ‐0.50%
‐0.50%
ICICI bank 0.25%
‐0.25% ‐0.10% ‐0.35%
‐0.50%
IndusInd bank 0.25%
0.00% 0.00% ‐0.25%
‐0.25%
Yes Bank 0.20%
0.25% 0.00% 0.00%
0.00%
SBI 0.00%
‐0.50% ‐0.15% ‐0.60%
‐0.25%
Bank of Baroda ‐0.75%
‐0.25% ‐0.10% ‐0.10%
0.00%
Bank of India ‐0.50%
‐0.25% ‐0.50% ‐0.35%
‐0.40%
Punjab National Bank ‐0.50%
‐0.50% ‐0.10% ‐0.20%
‐0.30%
0.00%
‐0.10% ‐0.25% ‐0.45%
‐0.45%
Union Bank Source: Company Data, PL Research *Change over Mar‐17 quarter SBI has not been too aggressive in cutting deposit rates recently compared to peers Jun‐15
Jun‐16
Current
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
SBI30days
SBI180days SBI1Yr SBI2Yr SBI3Yr SBI5Yr Source: Bloomberg, SBI July 11, 2017 38
Apr‐Jun 2017 Earnings Preview
MCLR cuts seen aggressively across banks in Dec & Jan, while have largely refrained in Base rate cut MCLR 1YR MCLR 1YR
Jun‐17 Mar‐17
HDFC Bank 8.15% 8.15%
Axis Bank 8.25% ICICI Bank Kotak Mah Indusind Bank Yes Bank Banks QoQ Chg.
MCLR 1YR
Diff Base Rate (BR)
Gap with BR Apr‐16
from Apr‐16 Jul‐17
0.00%
9.20%
‐1.05% 9.00%
‐0.85%
8.25%
0.00%
9.50%
‐1.25% 9.15%
‐0.90%
8.20% 8.20%
0.00%
9.20%
‐1.00% 9.35%
‐1.15%
8.85% 8.90%
0.05%
9.60%
‐0.70% 9.20%
‐0.30%
9.10% 9.10%
0.00%
10.15%
‐1.05% 10.55%
‐1.45%
8.80% 8.90%
0.10%
9.60%
‐0.70% 10.25%
‐1.35%
SBI 8.00% 8.00%
0.00%
9.20%
‐1.20% 9.00%
‐1.00%
Bank of Baroda 8.35% 8.35%
0.00%
9.30%
‐0.95% 9.50%
‐1.15%
Bank of India 8.50% 8.40%
‐0.10%
9.40%
‐1.00% 9.55%
‐1.15%
Punjab National Bank 8.45% 8.35%
‐0.10%
9.40%
‐1.05% 9.35%
‐1.00%
Canara Bank 8.45% 8.40%
‐0.05%
9.45%
‐1.05% 9.65%
‐1.25%
Union Bank 8.50% 8.40%
‐0.10%
9.50%
‐1.10% 9.20%
‐0.80%
Federal 8.95% 8.90%
‐0.05%
9.54%
‐0.64% 9.63%
‐0.73%
South Indian Bank 9.10% 9.10%
0.00%
10.00%
‐0.90% 10.00%
‐0.90%
J&K Bank 8.70% 8.90%
0.20%
9.45%
‐0.55% 9.50%
‐0.60%
BOB
BOI Union
Source: Company Data, PL Research Note – BOB will charge additional 0.35% as strategic premium over MCLR MCLR rates have seen no major changes post demonetisation cuts Change From Apr 16 Axis HDFCB ICICIBC KMB
Yes
FB
0.00% ‐0.05% ‐0.30%
IIB
0.00%
0.00%
SIB
JKBK
SBI PNB Base Rate BR ‐0.35% ‐0.30% 0.00% 0.00% ‐0.30% ‐0.25% ‐0.15% ‐0.15% ‐0.45%
Overnight ON ‐1.30% ‐1.10% ‐1.15% ‐1.10% ‐1.15% ‐1.10% ‐0.54% ‐1.50% ‐1.40% ‐1.20% ‐1.15% ‐0.90% ‐1.15% ‐1.35%
One month 1M ‐1.40% ‐1.20% ‐1.15% ‐1.10% ‐1.20% ‐1.00% ‐0.82% ‐1.45% ‐1.30% ‐1.20% ‐1.10% ‐0.85% ‐1.10% ‐1.20%
Three months 3M ‐1.40% ‐1.20% ‐1.20% ‐0.85% ‐1.10% ‐0.80% ‐0.90% ‐1.35% ‐1.20% ‐1.20% ‐1.10% ‐0.85% ‐1.10% ‐1.20%
Six months 6M ‐1.30% ‐1.20% ‐1.00% ‐0.85% ‐1.00% ‐0.85% ‐0.80% ‐1.20% ‐0.90% ‐1.20% ‐1.05% ‐0.80% ‐1.00% ‐1.20%
One year 1Y ‐1.25% ‐1.05% ‐1.00% ‐1.05% ‐0.95% ‐0.75% ‐0.64% ‐0.90% ‐0.55% ‐1.20% ‐1.05% ‐0.95% ‐1.00% ‐1.10%
Two year 2Y ‐1.30% ‐1.05% ‐1.00%
‐0.45% ‐1.20% Three year 3Y ‐1.30% ‐0.90% ‐1.00%
‐0.45% ‐1.20% ‐1.05% ‐0.85%
Five year 5Y ‐1.10%
‐1.10%
‐1.05% ‐1.00%
Source: Company Data, PL Research July 11, 2017 39
Apr‐Jun 2017 Earnings Preview
Q1FY18 Results Preview (Rs m) – Earnings recovery for PSBs, while private banks with retail focus to continue robust trajectory; NBFCs will showcase stable profitability HDFC Ba nk
ICICI Ba nk Axi s Ba nk Kota k
Indus Ind
Yes SIB
J&K
Federa l
IDFC Ba nk
SBI
PNB
BOI
BOB
Uni on
HDFC
LIC Hous i ng
MMFSL
Shri ra m Tra n.
LTFH
Ca pi ta l Fi rs t
Total
Total Private Banks
Total Public Banks
HDFC Ba nk
ICICI Ba nk Axi s Ba nk Kota k
Indus Ind
Yes SIB
J&K
Federa l
IDFC Ba nk
SBI
PNB
BOI
BOB
Uni on
HDFC
LIC Hous i ng
MMFSL
Shri ra m Tra n.
LTFH
Ca pi ta l Fi rs t
Total
NII
94,795
58,571
47,367
22,714
17,343
17,423
4,597
6,510
8,553
5,460
1,66,549
37,965
29,984
36,370
23,420
24,490
9,852
7,644
11,589
10,066
5,046
6,46,308
2,83,333
2,94,288
Loans (Rs bn)
5,723
4,800
3,831
1,395
1,193
1,402
471
508
744
504
15,318
4,006
3,738
3,813
2,779
3,056
1,471
476
812
668
162
56,872
QoQ
4.7%
‐1.8%
0.2%
5.1%
4.0%
6.3%
4.7%
‐0.6%
1.5%
8.7%
‐7.8%
3.1%
‐13.6%
1.5%
‐1.9%
‐14.1%
‐5.2%
‐25.9%
1.3%
0.2%
7.6%
‐2.6%
2.5%
‐5.7%
QoQ
3.2%
3.4%
2.7%
2.5%
5.5%
6.0%
1.6%
2.0%
1.5%
2.0%
‐2.5%
‐4.5%
2.0%
‐0.5%
‐3.0%
3.3%
1.8%
1.9%
3.1%
0.3%
7.3%
0.4%
YoY
21.8%
13.5%
4.9%
18.4%
27.9%
32.3%
23.0%
2.9%
23.5%
9.4%
16.4%
2.6%
8.0%
7.9%
11.4%
9.9%
19.5%
14.2%
‐0.1%
19.7%
48.4%
14.2%
16.9%
12.1%
YoY
21.6%
6.8%
11.1%
15.5%
27.4%
32.3%
14.3%
4.0%
25.9%
9.7%
8.1%
2.3%
2.9%
5.1%
8.2%
15.0%
15.4%
14.4%
8.6%
14.9%
18.5%
10.4%
PPOP
70,474
53,067
45,275
18,467
15,823
17,104
3,079
2,988
5,546
3,238
1,21,798
34,357
21,834
29,792
19,885
23,835
8,775
4,232
11,386
7,768
2,587
5,21,311
2,35,062
2,27,667
Margins
4.32%
3.48%
3.65%
4.55%
4.00%
3.60%
2.75%
3.45%
3.25%
2.14%
2.80%
2.28%
2.12%
2.18%
2.30%
3.90%
2.85%
6.48%
7.15%
6.03%
9.81%
3.96%
QoQ
‐3.2%
3.8%
3.5%
8.5%
0.6%
1.1%
9.6%
8.1%
1.0%
24.4%
‐24.0%
‐44.9%
‐30.2%
‐1.4%
‐6.8%
‐22.8%
‐2.0%
‐41.6%
‐0.3%
0.4%
10.3%
‐13.8%
1.8%
‐25.5%
QoQ
0.02%
‐0.09%
‐0.18%
‐0.05%
0.00%
0.00%
0.01%
‐0.05%
‐0.03%
0.20%
‐0.04%
‐0.02%
‐0.33%
0.01%
0.03%
‐0.20%
‐0.12%
‐2.45%
‐0.12%
‐0.22%
0.09%
‐0.17%
YoY
21.1%
1.8%
1.3%
40.4%
28.2%
30.9%
18.7%
‐14.5%
30.2%
‐25.5%
10.2%
4.9%
32.0%
11.6%
22.4%
‐21.6%
18.6%
18.0%
10.5%
40.5%
48.0%
10.9%
12.9%
12.3%
YoY
‐0.08%
0.32%
‐0.14%
0.18%
0.03%
0.20%
0.09%
0.07%
‐0.07%
0.20%
‐0.03%
‐0.17%
0.07%
‐0.05%
0.02%
0.10%
0.24%
‐0.01%
‐0.16%
0.25%
1.63%
0.13%
PAT
39,223
21,224
12,507
10,863
8,452
9,535
902
(1,953)
2,858
2,014
30,037
2,917
(1,316)
2,964
1,706
15,369
5,301
1,014
3,566
2,814
723
1,70,719
1,05,624
36,308
Credit Cost
0.77%
2.06%
2.76%
0.58%
0.98%
0.76%
1.45%
3.69%
0.62%
0.15%
2.06%
3.01%
2.55%
2.65%
2.49%
0.25%
0.17%
2.24%
2.91%
2.62%
3.68%
1.90%
QoQ
‐1.7%
4.8%
2.1%
11.2%
12.4%
4.3%
19.4%
NA
11.4%
14.4%
6.7%
11.4%
‐87.4%
90.5%
57.6%
‐24.8%
0.2%
‐56.7%
138.3%
‐10.9%
2.1%
10.3%
7.4%
58.2%
QoQ
‐0.14%
‐0.43%
0.00%
‐0.21%
‐0.54%
‐0.18%
0.03%
‐2.48%
‐0.05%
0.11%
‐0.93%
‐2.47%
‐2.62%
‐0.09%
‐0.92%
0.05%
‐0.08%
‐0.85%
‐1.72%
‐1.51%
0.33%
‐0.80%
YoY
21.1%
‐4.9%
‐19.6%
46.4%
27.8%
30.3%
‐5.1%
NA
70.8%
‐23.9%
19.2%
‐4.8%
‐82.2%
‐30.0%
2.6%
‐17.8%
30.0%
16.6%
‐4.7%
35.7%
47.1%
11.0%
8.8%
35.7%
YoY
0.04%
‐0.17%
0.31%
‐0.02%
‐0.01%
‐0.02%
0.35%
1.12%
‐0.52%
‐0.06%
‐0.03%
0.22%
‐0.50%
0.44%
0.38%
‐0.27%
‐0.20%
0.08%
0.44%
0.88%
0.77%
0.17% Source: Company Data, PL Research July 11, 2017 40
Apr‐Jun 2017 Earnings Preview
Margins in Q1FY18 – Margin pressure remains on lower credit offtake, but deterioration in margins lesser due to lower interest reversals HDFC Ba nk
ICICI Ba nk Axi s Ba nk Kota k
Indus Ind
Yes SIB
J&K
Federa l
IDFC Ba nk
SBI
PNB
BOI
BOB
Uni on
HDFC
LIC Hous i ng
MMFSL
Shri ra m Tra n.
LTFH
Ca pi ta l Fi rs t
Q1FY17
4.40%
3.16%
3.79%
4.37%
3.97%
3.40%
2.66%
3.38%
3.33%
1.94%
2.83%
2.45%
2.05%
2.23%
2.28%
3.80%
2.61%
6.48%
7.30%
5.78%
8.18%
Q4FY17
4.30%
3.57%
3.83%
4.60%
4.00%
3.60%
2.74%
3.50%
3.29%
1.94%
2.84%
2.30%
2.45%
2.17%
2.27%
4.10%
2.97%
8.92%
7.27%
6.25%
9.72%
Q1FY18E
4.32%
3.48%
3.65%
4.55%
4.00%
3.60%
2.75%
3.45%
3.25%
2.14%
2.80%
2.28%
2.12%
2.18%
2.30%
3.90%
2.85%
6.48%
7.15%
6.03%
9.81%
YoY
‐0.08%
0.32%
‐0.14%
0.18%
0.03%
0.20%
0.09%
0.07%
‐0.07%
0.20%
‐0.03%
‐0.17%
0.07%
‐0.05%
0.02%
0.10%
0.24%
‐0.01%
‐0.16%
0.25%
1.63%
QoQ
0.02%
‐0.09%
‐0.18%
‐0.05%
0.00%
0.00%
0.01%
‐0.05%
‐0.03%
0.20%
‐0.04%
‐0.02%
‐0.33%
0.01%
0.03%
‐0.20%
‐0.12%
‐2.45%
‐0.12%
‐0.22%
0.09% Source: Company Data, PL Research Total provisions in Q1FY18 – Credit cost to remain high and similar to last few quarter levels HDFC Ba nk
ICICI Ba nk Axi s Ba nk Kota k
Indus Ind
Yes SIB
J&K
Federa l
IDFC Ba nk
SBI
PNB
BOI
BOB
Uni on
HDFC
LIC Hous i ng
MMFSL
Shri ra m Tra n.
LTFH
Ca pi ta l Fi rs t
Q1FY17
0.74%
2.24%
2.46%
0.59%
0.98%
0.78%
1.11%
2.57%
1.14%
0.21%
2.09%
2.80%
3.05%
2.21%
2.11%
0.51%
0.37%
2.16%
2.46%
1.74%
2.91%
Q4FY17
0.91%
2.50%
2.77%
0.79%
1.52%
0.94%
1.43%
6.17%
0.67%
0.04%
2.99%
5.49%
5.17%
2.74%
3.41%
0.20%
0.25%
3.09%
4.63%
4.13%
3.35%
Q1FY18E
0.77%
2.06%
2.76%
0.58%
0.98%
0.76%
1.45%
3.69%
0.62%
0.15%
2.06%
3.01%
2.55%
2.65%
2.49%
0.25%
0.17%
2.24%
2.91%
2.62%
3.68%
YoY
0.04%
‐0.17%
0.31%
‐0.02%
‐0.01%
‐0.02%
0.35%
1.12%
‐0.52%
‐0.06%
‐0.03%
0.22%
‐0.50%
0.44%
0.38%
‐0.27%
‐0.20%
0.08%
0.44%
0.88%
0.77%
QoQ
‐0.14%
‐0.43%
0.00%
‐0.21%
‐0.54%
‐0.18%
0.03%
‐2.48%
‐0.05%
0.11%
‐0.93%
‐2.47%
‐2.62%
‐0.09%
‐0.92%
0.05%
‐0.08%
‐0.85%
‐1.72%
‐1.51%
0.33% Source: Company Data, PL Research July 11, 2017 41
Apr‐Jun 2017 Earnings Preview
Stock Performance (Banks) Absolute
1M
Relative to Sensex
3M
6M
12M
1M
3M
6M
12M
Axi s Ba nk
(0.7)
(0.2) 13.9
(6.7)
(2.2)
(7.4)
(4.0)
(23.6)
Ba nk of Ba roda
(4.0)
(2.4) 9.2
7.7
(5.4)
(9.7)
(8.7)
(9.2)
Ba nk of Indi a
4.1
2.4
38.1
2.7
(4.8) 16.3
34.2
21.2
Federa l Ba nk
(2.2) 27.3
63.8
87.6
(3.6) 20.1
45.9
70.7
HDFC Ba nk
0.6
17.0
38.3
43.0
(0.9) 9.7
20.4
26.1
ICICI Ba nk
(0.4) 15.5
23.2
32.7
(1.8) 8.3
5.3
15.8
IDFC Ba nk
11.1
7.9
5.5
37.6
9.6
0.7
(12.4) 20.6
Indus Ind Ba nk
2.1
9.4
34.3
38.4
0.7
2.2
16.3
21.5
Ja mmu & Ka s hmi r Ba nk
4.6
9.1
47.0
25.5
3.2
1.9
29.1
8.6
Kota k Ma hi ndra Ba nk
(1.8) 10.4
35.9
30.0
(3.3) 3.2
18.0
13.1
Punja b Na ti ona l Ba nk
0.8
0.7
28.4
30.3
(0.7)
(6.5) 10.5
13.4
South Indi a n Ba nk
2.3
32.7
51.9
40.8
0.9
25.5
34.0
23.9
Sta te Ba nk of Indi a
(1.0)
(1.2) 15.2
30.7
(2.5)
(8.4)
(2.7) 13.8
Uni on Ba nk of Indi a
(1.1) 0.8
20.8
(2.6)
(6.4) 1.8
19.7
3.9
Source: Bloomberg, PL Research Stock Performance (Financial Services) Absolute
1M
3M
Capi ta l Fi rs t
1.1
HDFC
(0.4) 11.7
Relative to Sensex
6M
(7.7) 20.1
34.7
12M
1M
3M
6M
12M
18.9
(0.3) (15.0) 2.2
1.9
27.7
(1.9) 4.5
10.8
16.8
L&T Fi na nce Hol di ngs
12.0
22.8
55.2
94.8
10.5
15.6
37.3
77.9
LIC Hous i ng Fi na nce
(1.9) 18.4
42.5
45.3
(3.4) 11.2
24.6
28.4
Mahindra & Ma hi ndra Fi nanci al Servi ces
2.6
8.1
30.2
3.7
1.1
12.3
(13.2)
Shri ra m Tra ns port Fi na nce
6.3
(2.9) 12.3
(12.9) 4.9
0.9
(10.1) (5.6) (29.8)
Source: Bloomberg, PL Research July 11, 2017 42
Apr‐Jun 2017 Earnings Preview
Banking Summary Financials ‐ Quarterly (Rs m) Companies
Axi s Ba nk
Ba nk of Ba roda
Ba nk of Indi a
Federal Bank
HDFC Ba nk
ICICI Ba nk
IDFC Ba nk
Indus Ind Ba nk
Ja mmu & Kas hmi r Ba nk
Q1FY18E
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
NII
47,367
45,169
4.9
47,286
0.2
208,571
180,931
15.3
PPP
45,275
44,694
1.3
43,747
3.5
196,796
175,845
11.9
NIM Calculated (%) 3.7
3.8
(14)bps 3.8
(18)bps 3.5
3.4
6 bps
PAT
12,507
15,555
(19.6) 12,251
2.1
71,310
36,793
93.8
NII
36,370
33,711
7.9
35,819
1.5
147,793
135,126
9.4
PPP
29,792
26,695
11.6
30,211
(1.4) 111,764
109,743
1.8
NIM Calculated (%) 2.2
2.2
(5)bps 2.2
1 bps 2.2
2.1
8 bps
PAT
2,964
4,236
(30.0) 1,556
90.5
32,072
13,823
132.0
NII
29,984
27,752
8.0
34,686
(13.6) 124,256
118,261
5.1
PPP
21,834
16,539
32.0
31,275
(30.2) 92,255
97,327
(5.2)
NIM Calculated (%) 2.1
2.0
7 bps 2.5
(33)bps 2.0
2.0
1 bps
PAT
(1,316) (7,414) (82.2) (10,455) (87.4) 7,437
(15,583) (147.7)
NII
8,553
6,927
23.5
8,424
1.5
38,194
30,526
25.1
PPP
5,546
4,259
30.2
5,492
1.0
26,211
19,249
36.2
NIM Calculated (%) 3.3
3.3
(3)bps 3.2
3.1
8 bps
(7)bps 3.3
PAT
2,858
1,673
70.8
2,566
11.4
12,691
8,308
52.8
NII
94,795
77,814
21.8
90,551
4.7
401,319
331,392
21.1
PPP
70,474
58,192
21.1
72,794
(3.2) 308,857
257,324
20.0
NIM Calculated (%) 4.3
4.4
(8)bps 4.3
2 bps 4.5
4.4
10 bps
PAT
39,223
32,389
21.1
39,901
(1.7) 176,814
145,496
21.5
NII
58,571
51,585
13.5
59,622
(1.8) 252,455
217,373
16.1
PPP
53,067
52,147
1.8
51,120
3.8
269,511
264,867
1.8
NIM Calculated (%) 3.5
3.2
32 bps 3.6
(9)bps 3.4
3.2
20 bps
PAT
21,224
22,324
(4.9) 20,246
4.8
122,435
98,011
24.9
NII
5,460
4,989
9.4
5,021
8.7
25,893
20,173.20
NA
PPP
3,238
4,349
(25.5) 2,602
24.4
22,005
17,588.12
NA
NIM Calculated (%) 2.1
2.4
(22)bps 1.9
20 bps 2.3
2.20
NA
PAT
2,014
2,648
(23.9) 1,760
14.4
12,328
10,250.95
NA
NII
17,343
13,564
27.9
16,675
4.0
72,631
60,626
19.8
PPP
15,823
12,338
28.2
15,722
0.6
65,535
54,510
20.2
0 bps 3.9
NIM Calculated (%) 4.0
4.0
4.0
(16)bps
PAT
8,452
6,614
27.8
7,516
12.4
36,233
28,679
26.3
NII
6,510
6,326
2.9
6,550
(0.6) 27,079
25,119
7.8
PPP
2,988
3,493
(14.5) 2,764
8.1
12,943
9.6
NIM Calculated (%) 3.5
3.4
7 bps 3.5
3.3
7 bps
PAT
(1,953) 229
3 bps 4.0
NA
(5,543)
14,184
(5)bps 3.4
NA
2,587
(16,323)
NA Source: Company Data, PL Research July 11, 2017 43
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Kota k Ma hi ndra Ba nk
Punjab Nati onal Ba nk
South Indi an Ba nk
State Ba nk of Indi a
Uni on Ba nk of Indi a
YES Ba nk
Q1FY18E
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
NII
22,714
19,191
18.4
21,614
5.1
111,608
96,130
16.1
PPP
18,467
13,150
40.4
17,020
8.5
92,572
78,911
17.3
NIM Calculated (%) 4.6
4.4
4.3
3 bps
PAT
10,863
7,420
46.4
18 bps 4.6
9,765
11.2
(5)bps 4.4
55,715
46,621
19.5
NII
37,965
36,990
2.6
36,835
3.1
168,483
149,932
12.4
PPP
34,357
32,746
4.9
62,318
(44.9) 150,859
145,652
3.6
(2)bps 2.3
NIM Calculated (%) 2.3
2.5
(17)bps 2.3
2.2
5 bps
PAT
2,917
3,064
(4.8) 2,619
11.4
27,955
13,248
111.0
NII
4,597
3,736
23.0
4,391
4.7
20,228
16,754
20.7
PPP
3,079
2,595
18.7
2,808
9.6
14,474
12,146
19.2
NIM Calculated (%) 2.8
2.7
9 bps 2.7
2.6
12 bps
PAT
902
951
(5.1) 755
19.4
5,355
3,925
36.4
NII
166,549
143,123
16.4
180,707
(7.8) 698,364
618,597
12.9
PPP
121,798
110,539
10.2
160,265
(24.0) 571,829
508,479
12.5
(4)bps 2.6
(3)bps 2.8
1 bps 2.7
NIM Calculated (%) 2.8
2.8
2.6
(0)bps
PAT
30,037
25,210
19.2
28,148
6.7
158,841
104,841
51.5
NII
23,420
21,023
11.4
23,870
(1.9) 100,216
89,033
12.6
PPP
19,885
16,251
22.4
21,341
(6.8) 79,612
74,301
7.1
4 bps 2.2
NIM Calculated (%) 2.4
2.4
2.2
2 bps
PAT
1,706
1,663
2.6
1,082
57.6
13,237
5,552
138.4
NII
17,423
13,166
32.3
16,397
6.3
79,192
57,973
36.6
PPP
17,104
13,068
30.9
16,910
1.1
76,860
58,375
31.7
NIM Calculated (%) 3.6
3.4
PAT
7,318
9,535
1 bps 2.3
20 bps 3.6
30.3
9,141
0 bps 3.5
4.3
44,337
Q4FY17 QoQ gr. (%)
12MFY18E
3.2
33,301
28 bps
33.1 Source: Company Data, PL Research Financial Services Summary Financials ‐ Quarterly (Rs m) Companies
Ca pi ta l Fi rs t
HDFC
L&T Fi na nce Hol di ngs
Q1FY18E
Q1FY17 YoY gr. (%)
12MFY17 YoY gr. (%)
NII
5,046
3,400
48.4
4,691
7.6
18,071
13,009
38.9
PPP
2,587
1,748
48.0
2,346
10.3
9,782
8,105
20.7
PAT
723
492
47.1
708
2.1
3,282
2,390
37.3
NII
24,490
22,292
9.9
28,524
(14.1) 121,794
99,540
22.4
PPP
23,835
30,397
(21.6) 30,862
(22.8) 117,038
94,634
23.7
PAT
15,369
18,707
(17.8) 20,442
(24.8) 92,829
74,427
24.7
NII
10,066
8,408
19.7
10,046
0.2
38,747
33,076
17.1
PPP
7,768
5,529
40.5
7,738
0.4
32,600
26,688
22.2
PAT
2,814
2,074
35.7
3,159
(10.9) 13,068
10,422
25.4 Source: Company Data, PL Research July 11, 2017 44
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
NII
9,852
8,245
19.5
10,396
(5.2) 42,390
36,755
15.3
PPP
8,775
7,399
18.6
8,954
(2.0) 36,970
31,645
16.8
PAT
5,301
4,078
30.0
5,292
0.2
23,327
19,216
21.4
NII
7,644
6,693
14.2
10,317
(25.9) 40,384
33,165
21.8
PPP
4,232
3,586
18.0
7,252
(41.6) 23,904
19,292
23.9
PAT
1,014
870
16.6
2,341
NA
10,452
4,002
161.1
NII
Shri ra m Tra ns port PPP
Fi na nce
PAT
11,589
11,598
(0.1) 11,440
1.3
58,886
54,671
7.7
11,386
10,300
10.5
(0.3) 45,918
43,494
5.6
3,566
3,741
(4.7) 1,496
138.3
12,600
21.9 LIC Hous i ng Fi na nce
Ma hi ndra & Ma hi ndra Fi na nci a l Servi ces
11,424
15,356
Source: Company Data, PL Research Consolidated Sectoral Data (Banks) Quarterly Table (Rs m) Key Figures (Rs m) 2017
2018E
Apr‐Jun'17
2019E
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
NII
2,147,949 2,476,281 2,846,086
NII
Growth (%)
9.7 15.3 14.9
PPP
462,729
411,053
12.6
536,389
(13.7)
PPP
1,887,260 2,093,323 2,356,823
PAT
141,932
123,879
14.6
121,309
17.0
Growth (%)
20.8 10.9 12.6
PAT
516,944 779,349 1,020,068
Growth (%)
44.5 50.8 30.9
PE (x)
577,621
505,066
14.4
588,446
(1.8)
27.9 18.5 14.1
Consolidated Sectoral Data (Financial Services) Key Figures (Rs m) Quarterly Table (Rs m) 2017
NII
270,216
2018E
2019E
320,271
376,173
NII
68,687
60,637
13.3
75,413
(8.9)
Apr‐Jun'17
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
Growth (%)
14.6
18.5
17.5
PPP
58,582
58,960
(0.6) 68,576
(14.6)
PPP
223,858
266,212
312,626
PAT
28,787
29,962
(3.9) 33,439
(13.9)
Growth (%)
15.4
18.9
17.4
123,056 158,314 188,493
PAT
Growth (%) 5.9 28.7 19.1
PE (x)
31.0 24.1 20.2
Note: (1) NII, PPP and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. (2) We have excluded IDFC Bank’s numbers in our aggregates July 11, 2017 45
Apr‐Jun 2017 Earnings Preview
Axis Bank Ra ti ng
REDUCE
Pri ce (Rs )
510
Ta rget Pri ce (Rs )
495
M/Ca p (Rs bn)
1,220.9
Sha res o/s (m)
2,395.0
Axis PPOP will remain under pressure given lower fees and loan growth. Margins have been holding up due to quality margins in retail book despite pressure in corporate book margins on aggressive MCLR cuts. Credit cost will continue to remain high and we expect similar impairment seen in last few quarters putting pressure on asset quality but mainly should be from watchlist. Quarterly Table (Rs m) Key Figures (Rs m) NII
180,931
208,571
234,729
NII
Q1
FY18E
47,367
PPP
175,845
196,796
220,407
PPP
45,275
3.4
3.5
3.3
Y/e March
FY17
NIM (%)
PAT
FY19E
36,793
71,310
97,376
15.4
29.8
40.7
(55.5) 93.3
36.6
EPS (Rs )
Growth (%)
FY18E
PE (x)
P / ABV (x)
33.1
17.1
12.5
2.5
2.4
2.0
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
45,169
YoY gr. (%)
4.9
Q4
12M
12M
FY17
FY18E
FY17
47,286 208,571 180,931
44,694
1.3
3.7
3.8
(14)bps
3.8
12,507
15,555
(19.6)
12,251
43,747
196,796
YoY gr. (%)
15.3
175,845
11.9
3.5
3.4
6 bps
71,310
36,793
93.8
11.1 3,730,694 4,234,337 3,730,693
13.5
Operating Metrics
Advances
3,831,422 3,449,252
Gros s NPA
247,602
95,532
159.2
212,805
253,816
212,805
19.3
Net NPA
101,212
40,102
152.4
86,266
118,919
86,266
37.9
Bank of Baroda BOB’s NII growth should be strong on back of recovery in loan growth, while margins should see stability on domestic loan growth and recovery in international margins. Slippages to remain stable at Rs39.0‐40.0bn similar to last few quarters giving stability to asset quality. Guidance on margins and loan growth will be seen along with slippages. Ra ti ng
ACCUMULATE
Pri ce (Rs )
167
Ta rget Pri ce (Rs )
190
M/Ca p (Rs bn)
385.3
Sha res o/s (m)
2,310.5
Quarterly Table (Rs m) Key Figures (Rs m) NII
135,126
147,793
166,099
NII
Q1
FY18E
36,370
PPP
109,743
111,764
119,872
PPP
29,792
26,695
11.6
30,211
111,764
109,743
1.8
2.1
2.2
2.2
2.2
2.2
(5)bps
2.2
2.2
2.1
8 bps
13,823
32,072
42,073
2,964
4,236
(30.0)
1,556
32,072
13,823
132.0
5.1 3,832,592 4,081,711 3,832,592
6.5
Y/e March
NIM (%)
PAT
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
July 11, 2017 FY17
6.0
FY18E
FY19E
13.9
18.2
(125.1) 132.0
31.2
27.9
1.6
12.0
1.4
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
33,711
YoY gr. (%)
7.9
Q4
12M
12M
FY17
FY18E
FY17
35,819 147,793 135,126
YoY gr. (%)
9.4
Operating Metrics
Advances
3,813,429 3,627,664
9.2
Gros s NPA
436,054
429,917
1.4
427,187
411,405
427,187
(3.7)
1.2
Net NPA
180,207
207,838
(13.3)
180,802
158,717
180,802
(12.2)
46
Apr‐Jun 2017 Earnings Preview
Bank of India Ra ti ng
REDUCE
Pri ce (Rs )
149
Ta rget Pri ce (Rs )
124
M/Ca p (Rs bn)
174.2
Sha res o/s (m)
1,167.8
BOI will likely continue to report losses on back of elevated credit cost, higher slippages, lower loan growth and pressure in margins. Last quarter had one‐off from stake sale in insurance sub which will be not there in Q1FY18. Asset quality will remain under pressure for the quarter but slight better recovery/upgrade may help restrict large deterioration. Quarterly Table (Rs m) Key Figures (Rs m) NII
118,261
124,256
136,427
NII
Q1
FY18E
29,984
PPP
97,327
92,255
95,529
PPP
21,834
2.0
2.0
2.1
Y/e March
FY17
NIM (%)
PAT
FY18E
FY19E
(15,583)
7,437
22,030
(16.6)
6.7
18.9
NA
NA
182.0
EPS (Rs )
Growth (%)
Y/e March
NIM Calculated (%)
2.1
PAT
(1,316)
Q1
FY17
27,752
YoY gr. (%)
8.0
16,539
32.0
2.0
7 bps
(7,414)
NA
Q4
12M
12M
FY17
FY18E
FY17
34,686 124,256 118,261
31,275
92,255
2.5
2.0
(10,455) 7,437
YoY gr. (%)
5.1
97,327
(5.2)
2.0
1 bps
(15,583)
NA
Operating Metrics
Advances
PE (x)
NA
22.3
7.9
Gros s NPA
P / ABV (x)
2.1
1.4
1.0
Net NPA
3,738,113 3,633,858
2.9 3,664,817 3,866,382 3,664,817
5.5
532,450
518,745
2.6
520,445
487,689
520,445
(6.3)
257,173
282,604
(9.0)
253,050
207,876
253,050
(17.9)
Federal Bank FB will continue its robust loan growth of 25‐26% YoY leading towards better NII growth of 23‐24%. Slippages rate should remain stable at Rs2.0‐2.5bn mainly being from SME but in‐line with guidance leading to stable cerdit cost. Margins to remain remain stable for the bank at 3.4%. Further guidance on credit cost, loan growth and fees will be keenly watched. Ra ti ng
BUY
Pri ce (Rs )
114
Ta rget Pri ce (Rs )
138
M/Ca p (Rs bn)
221.8
Sha res o/s (m)
1,939.6
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
NII
30,526
38,194
45,802
PPP
19,249
26,211
32,551
3.1
3.2
3.2
8,308
12,691
17,174
4.8
6.9
8.9
74.1
43.6
27.8
23.7
16.5
12.9
2.6
2.0
1.8
NIM (%)
PAT
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
July 11, 2017 NII
Q1
FY18E
8,553
Q1
FY17
6,927
PPP
5,546
4,259
30.2
5,492
26,211
19,249
36.2
3.3
3.3
(7)bps
3.3
3.2
3.1
8 bps
2,858
1,673
70.8
2,566
12,691
8,308
52.8
Advances
744,363
591,180
25.9
733,363
902,036
733,363
23.0
Gros s NPA
17,526
17,473
0.3
17,271
18,856
17,271
9.2
9,367
9,945
(5.8)
9,412
8,638
9,410
(8.2)
Y/e March
NIM Calculated (%)
PAT
YoY gr. (%)
23.5
Q4
12M
12M
FY17
FY18E
FY17
8,424 38,194 30,526
YoY gr. (%)
25.1
Operating Metrics
Net NPA
47
Apr‐Jun 2017 Earnings Preview
HDFC Bank Ra ti ng
BUY
Pri ce (Rs )
1,677
Ta rget Pri ce (Rs )
1,940
M/Ca p (Rs bn)
4,296.4
Sha res o/s (m)
2,562.5
HDFC bank should see improvement in its loan growth post impact from demonetisation helping overall earnings trajectory as well. Margins should remain stable. Fees should continue to grow below B/s growth, while opex should be moderate as bank has been improving productivity. We do not expect any asset quality issues. Quarterly Table (Rs m) Key Figures (Rs m) NII
331,392
401,319
485,240
NII
Q1
FY18E
94,795
PPP
257,324
308,857
371,937
PPP
70,474
58,192
21.1
72,794
308,857
257,324
20.0
4.4
4.5
4.5
4.3
4.4
(8)bps
4.3
4.5
4.4
10 bps
145,496
176,814
211,683
39,223
32,389
21.1
39,901
176,814
145,496
21.5
21.6 5,545,682 6,765,732 5,545,682
22.0
Y/e March
FY17
NIM (%)
PAT
EPS (Rs )
Growth (%)
FY18E
FY19E
57.2
69.0
82.6
17.0
20.7
19.7
29.3
24.3
20.3
5.1
4.4
3.7
PE (x)
P / ABV (x)
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
77,814
YoY gr. (%)
21.8
Q4
12M
12M
FY17
FY18E
FY17
90,551 401,319 331,392
YoY gr. (%)
21.1
Operating Metrics
Advances
5,723,144 4,706,225
Gros s NPA
62,187
49,209
26.4
58,857
65,175
58,857
10.7
Net NPA
19,278
14,934
29.1
18,440
22,023
18,440
19.4
ICICI Bank ICICIBC’s loan growth to remain slow at 6‐7% but continued to be led by retail with growth of 18‐20%. Margins should remain under pressure as interest de‐recognition continues from elevated slippages. Slippages to moderate from FY17 but will remain high and from the watchlist, but slippages outside the watchlist will be keenly watched. Ra ti ng
BUY
Pri ce (Rs )
292
Ta rget Pri ce (Rs )
380
M/Ca p (Rs bn)
1,698.1
Sha res o/s (m)
5,825.5
Quarterly Table (Rs m) Key Figures (Rs m) NII
217,373
252,455
282,777
NII
Q1
FY18E
58,571
PPP
264,867
269,511
297,721
PPP
53,067
52,147
1.8
51,120
269,511
264,867
1.8
3.2
3.4
3.4
3.5
3.2
32 bps
3.6
3.4
3.2
20 bps
98,011
122,435
146,117
21,224
22,324
(4.9)
20,246
122,435
98,011
24.9
6.8 4,642,321 5,060,130 4,642,321
9.0
Y/e March
NIM (%)
PAT
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
FY17
FY18E
FY19E
16.8
21.0
25.1
0.5
24.8
19.3
17.3
13.9
11.6
2.5
2.1
Adj. for Subs. Valuation of Rs88/share July 11, 2017 1.8
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
51,585
YoY gr. (%)
13.5
Q4
12M
12M
FY17
FY18E
FY17
59,622 252,455 217,373
YoY gr. (%)
16.1
Operating Metrics
Advances
4,800,160 4,494,265
Gros s NPA
458,015
271,936
68.4
425,515
430,950
421,594
2.2
Net NPA
261,209
150,407
73.7
254,510
234,023
252,168
(7.2)
48
Apr‐Jun 2017 Earnings Preview
IndusInd Bank Ra ti ng
BUY
Pri ce (Rs )
1,560
Ta rget Pri ce (Rs )
1,595
M/Ca p (Rs bn)
933.0
Sha res o/s (m)
598.1
IIB will continue its strong earnings trajectory with both robust growth and supported by strong margins. We expect overall asset quality to be stable and credit cost 15‐17bps (non‐annualized) of loans as bank had seen higher provisioning last quarter on one divergent account. Asset quality to remain stable for the bank. Quarterly Table (Rs m) Key Figures (Rs m) NII
60,626
72,631
92,626
NII
Q1
FY18E
17,343
PPP
54,510
65,535
83,484
PPP
15,823
Y/e March
FY17
NIM (%)
FY19E
4.0
3.9
4.0
28,679
36,233
47,253
48.1
60.6
79.0
18.2
26.0
30.4
32.4
25.7
19.7
4.7
4.1
3.5
PAT
EPS (Rs )
Growth (%)
FY18E
PE (x)
P / ABV (x)
Y/e March
NIM Calculated (%)
Q1
FY17
13,564
YoY gr. (%)
27.9
12,338
28.2
Q4
12M
12M
FY17
FY18E
FY17
16,675 72,631 60,626
15,722
65,535
YoY gr. (%)
19.8
54,510
20.2
4.0
4.0
3 bps
4.0
3.9
4.0
(16)bps
8,452
6,614
27.8
7,516
36,233
28,679
26.3
1,192,999
936,780
27.4 1,130,805 1,430,468 1,130,805
26.5
11,164
8,606
29.7
10,549
11,752
10,549
11.4
4,577
3,555
28.8
4,389
3,644
4,388
(17.0)
PAT
Operating Metrics
Advances
Gros s NPA
Net NPA
Jammu & Kashmir Bank We expect JKBK to continue report loss due to higher provisioning and lower loan growth, de‐stablizing operating performance. Loan growth to remain anaemic at 4.0% but better than last quarter. Bank will continue to improve its PCR through higher provisions and likely to have lower asset quality deterioration. Ra ti ng
REDUCE
Pri ce (Rs )
87
Ta rget Pri ce (Rs )
77
M/Ca p (Rs bn)
45.6
Sha res o/s (m)
521.5
Quarterly Table (Rs m) Key Figures (Rs m) NII
25,119
27,079
29,510
NII
Q1
FY18E
6,510
PPP
12,943
14,184
15,092
PPP
2,988
3,493
(14.5)
2,764
14,184
12,943
9.6
3.3
3.4
3.4
3.5
3.4
7 bps
3.5
3.4
3.3
7 bps
2,587
5,078
(1,953)
229
(953.7)
508,124
488,544
4.0
Y/e March
NIM (%)
PAT
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
July 11, 2017 FY17
(16,323)
FY18E
FY19E
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
6,326
YoY gr. (%)
2.9
Q4
12M
12M
FY17
FY18E
FY17
6,550 27,079 25,119
(5,543) 2,587
(16,323)
YoY gr. (%)
7.8
NA
Operating Metrics
(32.4)
5.0
9.7
(478.1)
NA
96.3
(2.7)
17.6
9.0
Gros s NPA
61,000
47,149
29.4
60,000
57,319
60,000
(4.5)
1.1
Net NPA
20,725
30,235
(31.5)
24,254
20,725
24,254
(14.5)
1.7
1.4
Advances
498,161
523,069
498,161
5.0
49
Apr‐Jun 2017 Earnings Preview
Kotak Mahindra Bank Ra ti ng
ACCUMULATE
Pri ce (Rs )
967
Ta rget Pri ce (Rs )
KMB’s should witness strong earnings growth on improvement in loan growth to 15‐
16% mainly from SME/Retail and stable margins helping operating performance as well. Opex should be under control, while fees should improve. We do not see any issues in asset quality leading to stable credit cost guidance. 1,086
M/Ca p (Rs bn)
1,780.6
Sha res o/s (m)
1,840.9
Quarterly Table (Rs m) Key Figures (Rs m) ‐ Consolidated NII
96,130
111,608
134,782
NII
Q1
FY18E
22,714
PPP
78,911
92,572
112,671
PPP
18,467
4.3
4.4
4.5
Y/e March
FY17
NIM (%)
PAT
FY19E
46,621
55,715
68,912
25.2
30.1
37.3
46.4
19.6
23.8
EPS (Rs )
Growth (%)
FY18E
PE (x)
P / ABV (x)
38.4
32.1
25.9
5.0
4.2
3.5
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
19,191
YoY gr. (%)
18.4
Q4
12M
12M
FY17
FY18E
FY17
21,614 111,608 96,130
13,150
40.4
4.6
4.4
18 bps
4.6
10,863
7,420
46.4
9,765
17,020
92,572
YoY gr. (%)
16.1
78,911
17.3
4.4
4.3
3 bps
55,715
46,621
19.5
Operating Metrics
15.5 1,360,821 1,981,655 1,703,062
16.4
Gros s NPA
Advances
1,394,842 1,207,650
36,860
30,588
20.5
35,786
35,668
37,954
(6.0)
Net NPA
16,739
14,671
14.1
17,181
16,523
18,095
(8.7)
Punjab National Bank PNB is likely to report stable set of earnings with some moderation in credit cost. Last quarter had also seen one off gains in employee expenses which should normalize in Q1FY18. We expect net slippage to be lower but gross slippages still remain elevated for PNB which still remains a worry. Ra ti ng
ACCUMULATE
Pri ce (Rs )
153
Ta rget Pri ce (Rs )
160
M/Ca p (Rs bn)
326.1
Sha res o/s (m)
2,128.0
Quarterly Table (Rs m) Key Figures (Rs m) NII
149,932
168,483
195,949
NII
Q1
FY18E
37,965
PPP
145,652
150,859
170,964
PPP
34,357
32,746
4.9
62,318
150,859
145,652
3.6
2.2
2.3
2.4
2.3
2.5
(17)bps
2.3
2.3
2.2
5 bps
13,248
27,955
51,617
2,917
3,064
(4.8)
2,619
27,955
13,248
111.0
6.5
13.1
24.3
(131.1) 102.9
84.6
2.3 4,194,932 4,404,678 4,194,931
5.0
Y/e March
NIM (%)
PAT
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
July 11, 2017 FY17
FY18E
FY19E
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
36,990
YoY gr. (%)
2.6
Q4
12M
12M
FY17
FY18E
FY17
36,835 168,483 149,932
YoY gr. (%)
12.4
Operating Metrics
Advances
23.7
11.7
6.3
Gros s NPA
2.1
1.8
1.3
Net NPA
4,006,160 3,915,743
557,705
566,541
(1.6)
553,705
554,701
553,710
0.2
326,257
357,285
(8.7)
327,021
318,179
327,021
(2.7)
50
Apr‐Jun 2017 Earnings Preview
South Indian Bank Ra ti ng
BUY
Pri ce (Rs )
29
Ta rget Pri ce (Rs )
We expect SIB stable set of earnings and see some improvement in loan growth and stable NIMs helping better NII growth. Credit cost is likely to remain elevated post sale of some to ARCs and increase PCR ratio. Slippages rate should slow down helping asset quality to remain stable. 37
M/Ca p (Rs bn)
51.9
Sha res o/s (m)
1,802.8
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
NII
16,754
20,228
23,071
PPP
12,146
14,474
16,357
2.6
2.7
2.7
NIM (%)
PAT
3,925
5,355
7,036
2.5
3.0
3.9
0.9
19.3
31.4
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
NII
Q1
FY18E
4,597
Q1
FY17
3,736
YoY gr. (%)
23.0
PPP
3,079
2,595
18.7
Y/e March
11.6
9.7
7.4
1.3
1.2
1.0
State Bank of India Ra ti ng
BUY
Pri ce (Rs )
286
Ta rget Pri ce (Rs )
356
M/Ca p (Rs bn)
2,276.8
Sha res o/s (m)
7,973.5
Q4
12M
12M
FY17
FY18E
FY17
4,391 20,228 16,754
2,808
14,474
YoY gr. (%)
20.7
12,146
19.2
NIM Calculated (%)
2.8
2.7
9 bps
2.7
2.7
2.6
12 bps
PAT
902
951
(5.1)
755
5,355
3,925
36.4
Advances
471,317
412,370
14.3
463,895
535,798
463,895
15.5
Gros s NPA
11,940
16,516
(27.7)
11,490
14,418
11,490
25.5
6,806
11,918
(42.9)
6,746
6,047
6,746
(10.4)
Operating Metrics
Net NPA
SBI will report merged numbers and hence would be not comparable. On Standalone entity we believe bank will continue to deliver stable PPOP trends but see elevated credit costs as bank endeavours higher PCR especially for a/c under taken under the IBC. Slippages should trend in‐line with previous quarters at Rs100‐110bn and likely to be from the watchlist. Quarterly Table (Rs m) Key Figures (Rs m) NII
618,597
698,364
776,189
NII
Q1
FY18E
166,549
PPP
508,479
571,829
616,053
PPP
121,798
110,539
10.2
160,265
571,829
508,479
12.5
2.8
2.8
(3)bps
2.8
2.6
2.6
(0)bps
30,037
25,210
19.2
28,148
158,841
104,841
51.5
15,318,014
14,164,853
8.1
15,710,784
15,710,784
9.8
Y/e March
NIM (%)
PAT
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
July 11, 2017 FY17
FY18E
FY19E
2.6
2.6
2.6
104,841
158,841
216,929
13.3
19.9
27.2
2.0
49.5
36.6
21.4
14.3
10.5
2.2
1.9
1.6
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
143,123
YoY gr. (%)
16.4
Q4
12M
12M
FY17
FY18E
FY17
180,707 698,364 618,597
YoY gr. (%)
12.9
Operating Metrics
Advances
Gros s NPA
Net NPA
1,167,244 1,015,412
565,316
574,210
17,250,441
15.0 1,123,430 1,138,478 1,123,425
(1.5)
582,774
516,610
582,770
1.3
(11.4)
51
Apr‐Jun 2017 Earnings Preview
Union Bank of India Ra ti ng
REDUCE
Pri ce (Rs )
157
Ta rget Pri ce (Rs )
168
M/Ca p (Rs bn)
107.7
Sha res o/s (m)
687.4
We expect slight recovery in earnings despite credit cost likely remaining at similar levels of last few quarters. NII should recover on back of focus on non‐corporate and lower interest reversals as asset quality has caught up with other PSB peers and unlikely to see high slippages and higher provisions will lead to increase in PCR which is lowest among PSB peers. Quarterly Table (Rs m) Key Figures (Rs m) NII
89,033
100,216
111,387
NII
Q1
FY18E
23,420
PPP
74,301
79,612
83,741
PPP
19,885
2.2
2.2
2.2
Y/e March
FY17
NIM (%)
PAT
FY19E
5,552
13,237
16,960
8.1
19.3
24.7
(60.5) 138.4
28.1
EPS (Rs )
Growth (%)
FY18E
PE (x)
P / ABV (x)
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
21,023
YoY gr. (%)
11.4
Q4
12M
12M
FY17
FY18E
FY17
23,870 100,216 89,033
16,251
22.4
2.4
2.4
1 bps
2.3
2.2
2.2
2 bps
1,706
1,663
2.6
1,082
13,237
5,552
138.4
8.2 2,864,666 3,122,485 2,864,665
9.0
21,341
79,612
74,301
YoY gr. (%)
12.6
7.1
Operating Metrics
Advances
2,778,726 2,568,611
19.4
8.1
6.3
Gros s NPA
348,120
272,809
27.6
337,123
363,628
337,118
7.9
1.4
1.2
0.8
Net NPA
191,118
158,247
20.8
188,321
183,359
188,321
(2.6)
YES Bank Yes bank will continue its robust performance with loan growth remaining strong at +30% and strong earnings growth of 30% YoY. Fees partly has slowed down while divergence in asset quality with RBI had led to higher credit cost in Q4FY17 which will likely normalize in Q1FY18 and should remain with guidance. We do not expect any asset quality shocks. Ra ti ng
BUY
Pri ce (Rs )
1,513
Ta rget Pri ce (Rs )
1,850
M/Ca p (Rs bn)
690.5
Sha res o/s (m)
456.5
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
NII
PPP
NIM (%)
PAT
EPS (Rs )
Growth (%)
PE (x)
P / ABV (x)
July 11, 2017 FY17
57,973
FY18E
79,192
99,879
NII
Q1
FY18E
17,423
PPP
17,104
13,068
30.9
16,910
76,860
58,375
31.7
3.6
3.4
20 bps
3.6
3.5
3.2
28 bps
9,535
7,318
30.3
9,141
44,337
33,301
33.1
32.3 1,322,627 1,745,867 1,322,627
32.0
FY19E
58,375
76,860
94,149
3.2
3.5
3.6
33,301
44,337
54,448
75.9
97.1
119.3
25.3
27.9
22.8
19.9
15.6
12.7
3.2
2.8
2.4
Y/e March
NIM Calculated (%)
PAT
Q1
FY17
13,166
YoY gr. (%)
32.3
Q4
12M
12M
FY17
FY18E
FY17
16,397 79,192 57,973
YoY gr. (%)
36.6
Operating Metrics
Advances
1,401,984 1,059,420
Gros s NPA
21,356
8,446
152.9
20,186
13,808
20,186
(31.6)
Net NPA
10,963
3,024
262.5
10,723
3,797
10,723
(64.6)
52
Apr‐Jun 2017 Earnings Preview
Capital First Ra ti ng
BUY
Pri ce (Rs )
718
Ta rget Pri ce (Rs )
856
M/Ca p (Rs bn)
69.9
Sha res o/s (m)
97.4
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
28,159
Net Operating Inc.
Q1
FY18E
5,087
18,071
24,233
NII
5,046
9,782
12,630
3,282
4,479
FY18E
Net Op. Inc.
16,404
21,493
NII
13,009
PPP
8,105
PAT
2,390
EPS (Rs )
Growth (%)
CAFL’s will continue to witness robust AUM growth of 23‐25% in‐line with guidance but has been slightly coming off from last few quarters partly from wholesale & secured LAP facing headwinds. Spreads would be healthy as company continues to grow its unsecured business with benefit on cost of funds as well. CAFL is likely to move to 90dpd in Q1FY18 but would not see material effect on P&L. FY19E
25.3
33.7
46.0
37.8
33.0
36.5
Y/e March
Non Interes t Inc.
Q1
FY17
3,458
YoY gr. (%)
47.1
3,400
48.4
Q4
12M
12M
FY17
FY18E
FY17
4,766 21,493 16,404
4,691
18,071
13,009
YoY gr. (%)
31.0
38.9
40
57
(29.5)
75
3,422
3,395
0.8
PPP
2,587
1,748
48.0
2,346
9,782
8,105
20.7
PAT
723
492
47.1
708
3,282
2,390
37.3
2.9
3.0
(12)bps
3.4
2.9
3.3
(46)bps
Operating Metrics
NIM (%)
7.3
8.1
8.8
RoE (%)
11.9
13.4
16.0
Loans
161,931
136,653
18.5
150,914
190,940
151,359
26.2
PE (x)
28.3
21.3
15.6
AUM
213,109
172,125
23.8
198,241
246,879
198,241
24.5
3.1
2.7
2.4
9.8
8.2
163 bps
9.7
8.0
7.3
77 bps
P / BV (x)
Credit Cost
NIM
HDFC We expect HDFC’s AUMs to remain stable at 14‐15% keeping overall NII growth at 9‐
10% YoY. Spreads are likely to see slight pressure as HDFC passed some rate benefit to new and existing customers. Overall profitability should be lower comparatively on no material stake sale gains and dividend income which it has in Q1FY17. Ra ti ng
ACCUMULATE
Pri ce (Rs )
1,638
Ta rget Pri ce (Rs )
1,690
M/Ca p (Rs bn)
2,662.2
Sha res o/s (m)
1,625.2
Key Figures (Rs m) Y/e March
Net Op. Inc.
Quarterly Table (Rs m) FY17
FY18E
FY19E
103,002
126,113
148,485
NII
99,540
121,794
143,536
PPP
94,634
117,038
138,248
PAT
74,427
92,829
108,064
EPS (Rs )
Growth (%)
24,490
22,292
Non Interes t Inc.
47.0
57.8
66.5
23.0
15.1
PAT
3.6
3.8
3.9
20.2
20.3
19.6
PE (x)
34.9
28.4
24.6
6.8
5.1
Adj. for Subs. Valuation of Rs708/share July 11, 2017 NII
4.5
RoE (%)
Q1
FY17
32,672
PPP
NIM (%)
P / BV (x)
Net Operating Inc.
Q1
FY18E
25,964
Y/e March
4.5
YoY gr. (%)
(20.5)
9.9
Q4
12M
12M
FY17
FY18E
FY17
32,766 126,113 103,002
28,524
121,794
99,540
YoY gr. (%)
22.4
22.4
1,475
10,380
(85.8)
4,242
4,319
3,462
24.7
23,835
30,397
(21.6)
30,862
117,038
94,634
23.7
15,369
18,707
(17.8)
20,442
92,829
74,427
24.7
15.9
Operating Metrics
Advances
3,055,659 2,657,310
15.0 2,957,338 3,428,972 2,957,338
Borrowing
1,960,364 2,473,530
(20.7) 1,921,926 2,221,461 1,939,593
14.5
3 bps
6 bps
NIM
3.9
3.8
4.1
3.8
3.6
53
Apr‐Jun 2017 Earnings Preview
L&T Finance Holdings Ra ti ng
BUY
Pri ce (Rs )
150
Ta rget Pri ce (Rs )
210
M/Ca p (Rs bn)
263.0
Sha res o/s (m)
1,755.7
LTFH to continue its robust trajectory of earnings on back of stable loan growth and spreads from all business lines. Key businesses like MFI & 2W will be closely watched for stress but company has prudently providing on stressed assets. LTFH earnings should continue to benefit from goodwill loss for next few quarters even post taking voluntary credit costs. Key Figures (Rs m) Y/e March
Quarterly Table (Rs m) FY17
FY18E
FY19E
Net Op. Inc.
39,453
46,399
53,499
NII
33,076
38,747
44,317
PPP
26,688
32,600
38,165
PAT
10,422
13,068
17,288
EPS (Rs )
Growth (%)
5.2
6.8
9.3
31.9
30.5
36.5
Net Operating Inc.
Q1
FY18E
10,958
Q1
FY17
8,751
YoY gr. (%)
25.2
NII
10,066
8,408
19.7
Y/e March
Non Interes t Inc.
38,747
33,076
17.1
891
342
160.3
755
7,652
6,376
20.0
5,529
40.5
7,738
32,600
26,688
22.2
PAT
2,814
2,074
35.7
3,159
13,068
10,422
25.4
2.6
1.7
88 bps
4.1
3.1
2.3
75 bps
668,479
581,600
14.9
666,480
702,793
616,485
14.0
6.0
5.8
4 bps
6.2
5.9
5.6
5 bps
Operating Metrics
5.9
5.9
RoE (%)
12.4
14.5
17.3
PE (x)
28.7
22.0
16.1
Loans & Advances
2.9
NIM (% Lending Biz)
3.5
10,046
7,768
5.6
4.4
YoY gr. (%)
17.6
PPP
NIM (%)
P / BV (x)
Q4
12M
12M
FY17
FY18E
FY17
10,801 46,399 39,453
Credit Cost
LIC Housing Finance LICHF could see some moderation in spreads owing to lower pricing of new business leading to compression in incremental spreads. Loan growth to remain steady at ~15% YoY but mainly led by LAP/developer book. Guidance on incremental spreads and retail loan book growth will be clearly watched for. Ra ti ng
ACCUMULATE
Pri ce (Rs )
743
Ta rget Pri ce (Rs )
725
M/Ca p (Rs bn)
375.3
Sha res o/s (m)
505.0
Key Figures (Rs m) Y/e March
FY18E
FY19E
Y/e March
Net Op. Inc.
37,857
43,841
50,550
NII
36,755
42,390
48,871
Net Operating Inc.
NII
PPP
31,645
36,970
42,649
PAT
19,216
23,327
26,901
Non Interes t Inc.
Q1
FY18E
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
10,402
8,780
18.5
10,919
43,841
37,857
15.8
9,852
8,245
19.5
10,396
42,390
36,755
15.3
549
535
2.6
523
1,452
1,102
31.8
8,775
7,399
18.6
8,954
36,970
31,645
16.8
5,301
4,078
30.0
5,292
23,327
19,216
21.4
38.2
46.4
53.5
PPP
16.3
21.3
15.3
PAT
NIM (%)
2.6
2.6
2.6
RoE (%)
19.0
19.1
18.6
Credit Cost
0.2
0.4
(1)bps
0.3
0.1
0.2
(0)bps
PE (x)
19.4
16.0
13.9
NIM
2.9
2.6
9 bps
3.0
2.6
2.6
(0)bps
3.5
2.9
2.4
15.4 1,445,340 1,675,916 1,445,340
16.0
EPS (Rs )
Growth (%)
P / BV (x)
July 11, 2017 Quarterly Table (Rs m) FY17
Operating Metrics
Loans
1,470,634 1,274,370
54
Apr‐Jun 2017 Earnings Preview
M&M Financial Services Ra ti ng
ACCUMULATE
Pri ce (Rs )
366
Ta rget Pri ce (Rs )
MMFSL’s asset growth should continue to be strong 14‐15% YoY mainly on strong tractor & PV segment growth. Margins should remain stable, while asset quality should see slight weakness owing to seasonality with normalized credit cost. Key factor to watch is recoveries from unpaid contracts due to effect of demonetisation. 375
M/Ca p (Rs bn)
206.9
Sha res o/s (m)
565.0
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Operating Inc.
Q1
FY18E
8,059
Q1
FY17
6,847
YoY gr. (%)
17.7
7,644
6,693
14.2
10,317
40,384
33,165
21.8
95
93
2.5
173
725
636
14.0
Y/e March
Q4
12M
12M
FY17
FY18E
FY17
11,290 41,109 33,801
YoY gr. (%)
21.6
Net Op. Inc.
33,801
41,109
48,299
NII
33,165
40,384
47,465
NII
PPP
19,292
23,904
28,059
Non Interes t Inc.
PAT
4,002
10,452
13,005
PPP
4,232
3,586
18.0
7,252
23,904
19,292
23.9
7.1
18.5
23.0
PAT
1,014
870
16.6
2,341
10,452
4,002
161.1
(40.5) 161.0
24.4
EPS (Rs )
Growth (%)
NIM (%)
8.1
RoE (%)
PE (x)
P / BV (x)
8.7
8.8
Operating Metrics
Credit Cost
2.5
2.4
12 bps
3.4
2.0
3.2
(117)bps
476,414
416,622
14.4
467,760
537,577
467,755
14.9
11,620
(35.9) 7,908
39,786
34,619
14.9
8.0
7.6
47 bps
6.4
15.8
18.3
AUM
51.7
19.8
15.9
Off‐Bal ance sheet AU 7,445
4.2
4.1
3.6
NIM (% AUM)
6.5
6.5
(1)bps
8.9
Shriram Transport Finance We expect AUMs to remain soft at 8‐9% given the weak volumes post pre‐buying and the GST related uncertainty. Spreads should remain broadly steady as bank funding rate benefit will continue to flow in but yields remain under pressure as well. We expect steady asset quality to be stable with similar credit costs of last year, more importantly guidance for FY18 will be watched. Ra ti ng
ACCUMULATE
Pri ce (Rs )
1,054
Ta rget Pri ce (Rs )
1,145
M/Ca p (Rs bn)
239.2
Sha res o/s (m)
226.9
Quarterly Table (Rs m) Key Figures (Rs m) Net Op. Inc.
56,243
60,615
69,689
Net Operating Inc.
Q1
FY18E
14,492
NII
54,671
58,886
67,752
NII
11,589
11,598
(0.1)
11,440
58,886
54,671
7.7
203
167
21.8
240
1,730
1,572
10.0
Y/e March
FY17
FY18E
FY19E
Y/e March
Q1
FY17
13,641
YoY gr. (%)
6.2
Q4
12M
12M
FY17
FY18E
FY17
14,327 60,615 56,243
YoY gr. (%)
7.8
PPP
43,494
45,918
52,876
Non Interes t Inc.
PAT
12,600
15,356
18,756
PPP
11,386
10,300
10.5
11,424
45,918
43,494
5.6
55.5
67.7
82.7
PAT
3,566
3,741
(4.7)
1,496
15,356
12,600
21.9
3.0
2.5
45 bps
4.7
3.1
3.7
(59)bps
812,178
748,085
8.6
787,609
916,442
787,609
16.4
23.8
132,981
152,928
132,981
15.0
(16)bps
7.3
7.5
7.9
EPS (Rs )
Growth (%)
NIM (%)
6.9
21.9
22.1
7.4
6.9
6.9
Operating Metrics
Credit Cost
RoE (%)
11.7
12.7
13.6
AUM
PE (x)
19.0
15.6
12.8
Off‐Balance sheet AU 134,310 108,465
2.5
2.2
2.0
P / BV (x)
NIM (% AUM)
7.1
7.3
(39)bps July 11, 2017 55
Apr‐Jun 2017 Earnings Preview
Kunal Sheth [email protected] +91‐22‐6632 2257 Top picks Larsen & Toubro Sadbhav Engineering Capital Goods Capital Goods index over the last three months underperformed the broader markets by 6.6%. While the government is trying to push public expenditure, it is still not broad‐based. While companies have acknowledged that government is working in the right direction, the pace of recovery is slower than expected. However, most corporates remain confident of medium‐term growth prospects, given the various initiatives taken by the government. Continued government focus is on revival through increased infrastructure allocation is widely expected to drive growth in the sector. GST could be a disrupter in near term. Commentaries on end markets like Road/PowerT&D/Metros/Renewable/Railways/Defence/Water/Genset were positive for the year ahead. Public spending continues to drive capex, while private capex continue to be subdued. With increasing focus of state government on development, select state also has seen uptick in areas like Water/irrigation/T&D/Roads etc. While most corporates continue to be confident of medium‐term growth prospects, given the various initiatives taken by the government, GST implementation could create near‐term uncertainty. Commentary on international markets continues to be mixed bag, while ME saw some slowdown due to oil prices, order inflow/Enquiries from South East ASIA/Africa continue to look up. Investment climate in India remained subdued in the first quarter of FY18. As per the data released by CMIE’s CapEx service, only 448 new projects with an aggregate investment of Rs.1.4trn were announced during the quarter. This is much lower than the average quarterly investment announcements of Rs2.2trn seen in the last three years. New investment announcements in the manufacturing sector dropped to a two‐year low of mere Rs375bn in the June 2017 quarter. Power sector also saw new investment announcements fall to Rs60bn, touching its lowest level in the last 15 years. The completion activity also remained weak, with projects worth only Rs1trn being commissioned during the quarter. The largest project completed was Phase I of Jindal Steel & Power’s Angul Steel plant worth Rs330bn, followed by Phase I of Bangalore Metro Rail project which involved an investment of Rs140bn.52 projects were scrapped between April and June 2017. The aggregate value of projects scrapped in the June 2017 quarter was a huge Rs2.4trn. July 11, 2017 56
Apr‐Jun 2017 Earnings Preview
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Mar‐08
Jun‐08
Sep‐08
Dec‐08
Mar‐09
Jun‐09
Sep‐09
Dec‐09
Mar‐10
June‐10
Sep‐10
Dec‐10
Mar‐11
June‐11
Sep‐11
Dec‐11
Mar‐12
Jun‐12
Sep‐12
Dec‐12
Mar‐13
Jun‐13
Sep‐13
Dec‐13
Mar‐14
Jun‐14
Sep‐14
Dec‐14
Mar‐15
Jun‐15
Sep‐15
Dec‐15
Mar‐16
Jun‐16
Sep‐16
Dec‐16
Mar‐17
June
(Rs bn)
New project announcements Source: CMIE, PL Research Break‐up of new project announcement (Rs trn) Total
5.1
6
10.2
8
7.8
FY13 FY14 FY15 FY16 FY17 Government 1.8 3.3 4.8 2.5 2.2 Private
3.3
2.7
5.4
5.5
5.6
Source: PL Research, CMIE Project investments (Rs trn) 16‐Jun 16‐Sep 16‐Dec 17‐Mar 17‐Jun New
1.46
2.36
1.43
2.92
1.35
Completed 1.16 2.21 0.93 1.77 0.97 Stalled
1.4
0.64
1.01
0.35
2.4
Revived
0.4
0.91
0.17
0.62
0.44
Source: xxx IIP trend 50.0
General ‐ IIP
Capital goods
40.0
30.0
20.0
10.0
0.0
‐10.0
‐20.0
‐30.0
Apr 16
Jan 16
Jul 15
Oct 15
Apr 15
Jan 15
Oct 14
Jul 14
Apr 14
Jan 14
Jul 13
Oct 13
Jan 13
Apr 13
Oct 12
Jul 12
Apr 12
Jan 12
Oct 11
Jul 11
Jan 11
Apr 11
‐40.0
Source: RBI July 11, 2017 57
Apr‐Jun 2017 Earnings Preview
L&T continues to be the best play in the Indian Capital goods space, given its strong execution capabilities and relatively healthy/large balance sheet. Strong order carry gives additional comfort on earnings visibility. We expect the stock to deliver standalone and consolidated earnings CAGR of 13% and 27% over FY16‐18E on standalone and consolidated basis, respectively. The stock is trading at a core PER of 17.5x FY18E earnings. Sadbhav Engineering (SEL), one of the leading players in the Infrastructure/Road sector, has its presence in the Mining and Irrigation segment. The company owns 13 road Build, Operate and Transfer (BOT) projects. Healthy order book (Rs75bn, 2.35x FY16 sales) provides strong visibility and an improving outlook across all its segment augurs well for future growth. The stock is trading at core PER of 16x FY18E earnings. We believe healthy order book (Rs119bn, 3.3x FY17 sales) provides strong visibility and an improving outlook across segments which augur well for future growth. Limited commitment on the current BOT portfolio and well‐funded balance sheet makes it well‐placed to benefit from improved ordering in the Road sector. Stock Performance Absolute
1M
3M
ABB
(0.1) 3.4
As hoka Bui l dcon
Relative to Sensex
6M
12M
1M
3M
6M
12M
23.8
15.6
(1.5)
(3.9) 5.9
(1.4)
1.6
(9.9) 21.9
15.7
0.1
(17.2) 4.0
(1.3)
Bha ra t El ectroni cs
2.7
0.4
37.3
1.3
(6.9)
(3.7) 20.4
BHEL
(1.0)
(21.4) 7.2
14.2
(0.3)
(2.4)
(28.6)
(10.7)
(17.2)
Cummi ns Indi a
(0.6)
(6.8) 10.2
11.2
(2.0)
(14.0)
(7.7)
(5.8)
Engi neers Indi a
2.5
4.4
(0.2) 51.9
1.0
(2.8)
(18.1) 35.0
J.Kuma r Infra projects
0.8
22.8
33.5
(0.6) 15.5
32.1
15.6
15.2
Ka l pa ta ru Power Tra ns mi s s i on
(1.4) 3.2
27.0
27.9
(2.8)
(4.0) 9.1
10.9
KEC Interna ti ona l
4.4
26.9
88.6
87.8
3.0
19.7
70.7
70.9
KSB Pumps
13.7
12.6
30.7
10.4
12.2
5.3
12.8
(6.5)
La rs en & Toubro
(2.5) 3.4
24.9
13.1
(4.0)
(3.8) 7.0
(3.8)
Power Gri d Corpora ti on of Indi a
2.2
8.3
13.3
28.1
0.8
1.1
(4.6) 11.2
Sa dbha v Engi neeri ng
(5.1)
(7.3) 8.4
0.4
(6.6)
(14.5)
(9.5)
(16.5)
Si emens
1.9
3.8
16.3
9.0
0.5
(3.4)
(1.6)
(7.9)
Therma x
(4.5)
(6.6) 15.4
2.6
(6.0)
(13.9)
(2.5)
(14.3)
Vol ta s (5.1) 13.4
48.4
(6.6) 6.2
17.8
31.5
35.7
Source: Bloomberg, PL Research July 11, 2017 58
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
ABB
As hoka Bui l dcon
Bha ra t El ectroni cs
BHEL
Cummi ns Indi a
Engi neers Indi a
J.Kuma r Infra projects
Ka l pa ta ru Power Tra ns mi s s i on
KEC Interna ti ona l
KSB Pumps
Q1FY18E
July 11, 2017 Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
23,389
21,015
11.3
21,688
7.8
45,077
41,018
9.9
EBITDA
2,143
1,701
26.0
1,714
25.0
3,857
3,191
20.9
Margins (%)
9.2
8.1
126 bps 8.6
7.8
78 bps
107 bps 7.9
PAT
1,049
774
35.5
882
19.0
1,931
1,484
30.1
Sa l es
5,152
4,683
10.0
6,100
(15.5) 34,948
29,575
18.2
EBITDA
657
643
2.2
636
3.3
8,820
8,304
6.2
Margins (%)
12.8
13.7
233 bps 25.2
28.1
(284)bps
PAT
411
308
33.4
654
(37.1) 1,460
1,143
27.7
Sa l es
10,020
9,278
8.0
39,877
(74.9)
96,536
86,119
12.1
EBITDA
(550) (391) 40.5
9,796
(105.6)
18,313
17,617
3.9
Margins (%)
(5.5) (4.2)
(3,005)bps 19.0
20.5
(149)bps
PAT
(162) 361
(144.7) 7,917
(102.0)
17,952
15,476
16.0
Sa l es
59,036
56,225
5.0
96,882
(39.1) 320,026
282,222
13.4
EBITDA
1,640
710
130.9
6,509
(74.8) 22,853
11,009
107.6
Margins (%)
2.8
1.3
NA 6.7
NA 7.1
3.9
NA
PAT
841
778
8.2
(61.0) 16,023
4,959
223.1
Sa l es
12,100
12,590
(3.9) 11,844
2.2
55,256
50,773
8.8
EBITDA
1,895
2,063
(8.2) 1,700
11.4
9,117
8,018
13.7
Margins (%)
15.7
16.4
(73)bps 14.4
130 bps 16.5
15.8
71 bps
PAT
1,688
1,812
(6.9) 1,585
6.5
8,408
7,346
14.4
Sa l es
4,033
3,418
18.0
4,429
(8.9) 19,629
14,486
35.5
EBITDA
803
733
9.6
543
48.1
2,990
3,022
(1.0)
Margins (%)
19.9
21.4
767 bps 15.2
20.9
(563)bps
PAT
846
804
5.2
660
28.2
3,518
3,282
7.2
Sa l es
4,443
4,033
10.2
3,555
25.0
19,209
14,375
33.6
EBITDA
791
680
16.3
602
31.4
3,299
2,476
33.2
Margins (%)
17.8
16.9
87 bps 17.2
17.2
(5)bps
PAT
371
297
24.8
263
41.2
1,323
1,055
25.4
Sa l es
12,691
11,537
10.0
14,963
(15.2) 57,047
49,606
15.0
EBITDA
1,746
1,308
33.5
1,573
11.0
6,103
5,357
13.9
Margins (%)
13.8
11.3
324 bps 10.7
10.8
(10)bps
(97)bps 10.4
(127)bps 24.6
2,156
(153)bps 12.3
93 bps 16.9
242 bps 10.5
PAT
1,131
645
75.3
896
26.3
3,198
2,756
16.1
Sa l es
19,236
17,487
10.0
28,492
(32.5)
99,028
85,884
15.3
EBITDA
2,144
1,496
43.3
3,011
(28.8)
9,371
8,182
14.5
Margins (%)
11.1
8.6
58 bps 9.5
9.5
(6)bps
PAT
964
309
211.7
1,456
(33.8)
3,568
3,047
17.1
Sa l es
2,097
2,036
3.0
2,054
2.1
4,151
4,142
0.2
EBITDA
210
243
(13.7) 203
3.4
413
493
(16.3)
Margins (%)
10.0
11.9
(194)bps 9.9
12 bps 9.9
11.9
(197)bps
PAT
125
160
(22.0) 133
(6.6) 258
314
(17.9) Source: Company Data, PL Research Q1FY17 YoY gr. (%)
Sa l es
259 bps 10.6
ABB & KSB Pumps – Y/e Dec Siemens – Y/e Sep 59
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
La rs en & Toubro
Power Gri d Corpora ti on of Indi a
Sa dbha v Engi neeri ng
Si emens
Therma x
Vol ta s Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
Sa l es
234,050
218,738
7.0
368,280
(36.4) 1,232,123
EBITDA
21,064
19,052
10.6
43,351
(51.4)
29 bps 11.8
12.0
125,170
110,747
13.0
(277)bps 10.2
Margins (%)
9.0
8.7
PAT
9,747
8,564
13.8
34,614
(71.8)
Sa l es
67,318
61,199
10.0
67,120
EBITDA
56,904
54,196
5.0
56,185
(403)bps 83.7
12MFY17 YoY gr. (%)
1,100,110
10.1
9 bps
64,039
64,855
(1.3)
0.3
286,585
257,165
11.4
1.3
260,933
226,015
15.4
Margins (%)
84.5
88.6
82 bps 91.0
87.9
316 bps
PAT
18,537
18,018
2.9
19,164
(3.3) 86,025
74,502
15.5
Sa l es
9,119
8,070
13.0
10,329
(11.7)
38,841
33,203
17.0
EBITDA
919
868
5.8
1,096
(16.2)
4,274
3,556
20.2
(54)bps 11.0
Margins (%)
10.1
10.8
(68)bps 10.6
10.7
29 bps
PAT
409
487
(16.0) 682
(40.1)
2,062
1,878
9.8
Sa l es
27,776
26,204
6.0
29,288
(5.2) 57,064
49,157
16.1
EBITDA
2,639
2,338
12.8
2,786
(5.3) 5,425
4,696
15.5
(1)bps 9.5
9.6
(5)bps
(7.6) 3,449
2,921
18.1
Margins (%)
9.5
8.9
PAT
1,657
1,300
27.4
58 bps 9.5
Sa l es
7,738
8,145
(5.0) 13,428
(42.4)
51,796
44,831
15.5
EBITDA
713
637
11.9
(53.1)
5,157
4,330
19.1
(211)bps 10.0
Margins (%)
9.2
7.8
PAT
528
452
16.7
Sa l es
18,393
18,500
EBITDA
1,582
1,995
1,793
1,521
139 bps 11.3
9.7
30 bps
3,065
2,340
31.0
(0.6) 20,351
(9.6) 69,109
60,328
14.6
(20.7) 2,219
(28.7) 6,635
5,791
14.6
1,161
(54.6)
Margins (%)
8.6
10.8
(219)bps 10.9
(230)bps 9.6
9.6
0 bps
PAT
1,282
1,567
(18.2) 2,003
(36.0) 5,620
5,296
6.1
Source: Company Data, PL Research ABB & KSB Pumps – Y/e Dec Siemens – Y/e Sep Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) Apr‐Jun'17
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
2017E
2018E
2019E
Net Sales
2,054,363
2,315,142
2,652,056
Net Sa l es
449,273
421,960
6.5
671,559
(33.1)
Growth (%)
7.3
12.7
14.6
EBITDA
38,395
34,077
12.7
77,260
(50.3)
EBITDA
206,598
244,724
292,057
Margin (%)
8.5
8.1
47 bps
11.5
(296)bps
Margin (%)
10.1
10.6
11.0
PAT (Excl . Ex Items )
20,887
18,618
12.2
56,854
(63.3)
PAT
123,750
143,170
170,424
Growth (%)
47.5
15.7
19.0
41.3
35.7
30.0
PE (x)
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. All Nos. excluding Power Grid Corporation July 11, 2017 60
Apr‐Jun 2017 Earnings Preview
ABB Ra ti ng
Accumulate
Pri ce (Rs )
1,455
Ta rget Pri ce (Rs )
1,531
M/Ca p (Rs bn)
308.4
Sha res o/s (m)
211.9
State utilities digitalized parts of their networks and upgraded systems extending to various remote locations to continue to provide 24/7 reliable power to all. The traction in the transportation sector led by railways also helped retain the order momentum in this quarter. Sustained engagement in export markets have resulted in major order uptrend. Expect execution to be steady and healthy uptick in inflows. Key Figures (Rs m) Y/e Dec
CY16
Net Sa l es
CY18E
86,484
98,412
110,014
7,467
9,349
11,001
8.6
9.5
10.0
3,763
4,754
5,406
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
CY17E
Quarterly Table (Rs m) Y/e Dec
Net Sales
21,015
2,143
9.2
Reported PAT
EBITDA
Margin (%)
22.4
25.5
25.5
26.3
13.7
12.4
14.4
14.6
PAT (Excl . Ex Items )
Operating Metrics
PE (x)
82.0
64.9
57.0
P / BV (x)
9.9
8.8
7.9
EV / E (x)
41.2
32.8
27.8
Q2
CY16
23,389
17.8
RoE (%)
Q2
CY17E
Order Inflow
Order book
YoY gr. (%)
Q1
CY17
H1
CY17E
H1
CY16
YoY gr. (%)
11.3
21,688
45,077
41,018
9.9
1,701
26.0
1,714
3,857
3,191
20.9
8.1
107 bps
7.9
8.6
7.8
78 bps
1,049
774
35.5
882
1,931
1,484
30.1
1,049
774
35.5
882
1,931
1,484
30.1
22,440
20,400
10.0
23,420
45,860
43,250
6.0
118,993
77,425
53.7
119,942
118,993
77,425
53.7
Ashoka Buildcon We expect EPC sales to be up 9% YoY, as new orders are likely to start contributing to execution. Ra ti ng
Accumulate
Pri ce (Rs )
188
Ta rget Pri ce (Rs )
221
M/Ca p (Rs bn)
35.2
Sha res o/s (m)
187.1
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
FY18E
FY19E
29,575
34,948
40,156
8,304
8,820
10,143
28.1
25.2
25.3
1,143
1,460
1,745
6.1
7.8
(1.0) 27.7
9.3
19.5
6.0
7.2
8.1
30.8
24.1
20.2
P / BV (x)
1.8
1.7
1.6
EV / E (x)
9.6
8.9
7.2
PE (x)
FY17
July 11, 2017 Quarterly Table (Rs m) Y/e March
Net Sa les
EBITDA
Margin (%)
Q1
FY18E
5,152
Q1
FY17
4,683
YoY gr. (%)
10.0
Q4
12M
12M
FY17
FY18E
FY17
6,100 34,948 29,575
YoY gr. (%)
18.2
657
643
2.2
636
8,820
8,304
6.2
12.8
13.7
(97)bps
10.4
25.2
28.1
(284)bps
Reported PAT
411
308
NA
654
1,460
1,143
27.7
PAT (Excl . Ex Items )
411
308
33.4
654
1,460
1,143
27.7
EPC
4,791
4,312
11.1
5,673
20,553
19,239
6.8
BOT
55
61
(9.4)
90
4,510
3,879
16.3
Operating Metrics
61
Apr‐Jun 2017 Earnings Preview
Bharat Electronics Ra ti ng
Buy
Pri ce (Rs )
173
Ta rget Pri ce (Rs )
204
M/Ca p (Rs bn)
385.6
Sha res o/s (m)
2,233.0
BEL expects order inflow run rate of Rs100‐150bn per annum for the next few years. Major orders expected in FY18 include Akash Missile Systems (7 Sqdn), Long range surface to air missile for P17A, Commander TI sight, Mobile Cellular Communication System, EW systems etc. Margin are likely to be impacted YoY due to impact of wage revision. We expect execution to remain steady. Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sa l es
86,119
96,536
109,085
EBITDA
17,617
18,313
20,724
Margin (%)
20.5
19.0
19.0
15,476
17,952
20,371
6.9
8.0
9.1
27.2
16.0
13.5
RoE (%)
14.1
12.5
13.2
EBITDA
PE (x)
PAT
EPS (Rs )
Growth (%)
24.9
21.5
18.9
P / BV (x)
2.9
2.5
2.5
EV / E (x)
15.7
13.2
12.7
Quarterly Table (Rs m) Q1
FY18E
10,020
Q1
FY17
9,278
YoY gr. (%)
8.0
(550)
(391)
40.5
Margin (%)
(5.5)
(4.2) (127)bps
Reported PAT
(162)
361
(144.7)
PAT (Excl. Ex Items)
(162)
361
(144.7)
7,917
Y/e March
Net Sales
Q4
12M
12M
FY17
FY18E
FY17
39,877 96,536 86,119
YoY gr. (%)
12.1
9,796
18,313
17,617
3.9
24.6
19.0
20.5
(149)bps
7,917
17,952
15,476
16.0
17,952
15,476
16.0
BHEL Out of the total order book, ~Rs660bn of orders is executable orders and the remaining order book is slow moving. BHEL has bid for tenders worth 5.3GW. They also believe market size per annum for next few years could be ~12GW (including replacement projects from sub critical to super critical). BHEL highlighted that timeline for implementation on new emission norms could be extended. In the Industry segment, BHEL is seeing good opportunities in Solar/Defence/Railways and Water. It is also looking at new areas like Metro coaches/Electric mobility in transportation segment. Ra ti ng
Reduce
Pri ce (Rs )
137
Ta rget Pri ce (Rs )
145
M/Ca p (Rs bn)
336.3
Sha res o/s (m)
2,447.5
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
FY18E
FY19E
282,222
320,026
361,629
11,009
22,853
29,024
3.9
7.1
8.0
4,959
16,023
20,463
2.0
6.5
8.4
(169.9) 223.1
27.7
1.5
4.6
5.6
67.8
21.0
16.4
P / BV (x)
1.0
0.9
0.9
EV / E (x)
21.9
9.7
8.1
FY17
July 11, 2017 Quarterly Table (Rs m) Y/e March
Net Sa les
EBITDA
Q1
FY18E
59,036
Q1
FY17
56,225
1,640
710
Margin (%)
2.8
1.3
Reported PAT
841
778
PAT (Excl . Ex Items )
841
YoY gr. (%)
5.0
130.9
Q4
12M
12M
FY17
FY18E
FY17
96,882 320,026 282,222
YoY gr. (%)
13.4
6,509
22,853
11,009
NA
6.7
7.1
3.9
NA
8.2
2,156
16,023
4,959
NA
778
8.2
2,156
16,023
4,959
NA
1,050
1,087
(3.4)
1,050
1,050
1,100
(4.5)
60
32
87.5
154
450
510
(11.7)
NA
Operating Metrics (Rs bn)
Order book
Order inflow ‐Total
62
Apr‐Jun 2017 Earnings Preview
Cummins India Ra ti ng
Accumulate
Pri ce (Rs )
913
Ta rget Pri ce (Rs )
We expect the domestic market sales to grow by 4% YoY . We expect channel de‐
stocking to lead to weak domestic growth. We expect exports to de‐grow 17% YoY mainly led by very high base of last year. While YoY margins are likely to be down, QoQ margins are likely to improve due to improved mix. 1,050
M/Ca p (Rs bn)
253.0
Sha res o/s (m)
277.2
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY19E
50,773
55,256
61,925
8,018
9,117
10,527
15.8
16.5
17.0
7,346
8,408
9,698
26.5
30.3
35.0
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
(2.3) 14.4
15.3
Quarterly Table (Rs m) Y/e March
Net Sa les
EBITDA
Margin (%)
Q1
FY18E
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
12,100
12,590
(3.9)
11,844
55,256
50,773
8.8
1,895
2,063
(8.2)
1,700
9,117
8,018
13.7
15.7
16.4
(73)bps
14.4
16.5
15.8
71 bps
Reported PAT
1,688
1,812
(6.9)
1,585
8,408
7,346
14.4
1,688
1,812
(6.9)
1,585
8,408
7,346
14.4
RoE (%)
22.1
22.9
23.4
PAT (Excl . Ex Items )
PE (x)
34.4
30.1
26.1
Operating Metrics
P / BV (x)
7.3
6.5
5.7
Domes ti c s al es
8,260
7,920
4.3
7,500
36,295
33,861
7.2
EV / E (x)
31.5
27.6
23.8
Export s a les
3,400
4,130
(17.7)
3,100
16,998
16,503
3.0
Engineers India Implementation of Euro VI projects and brown field expansion of refineries were awarded as planned in FY17. Expect momentum to continue in FY18. Medium term opportunities include Maharashtra refinery phase‐I (site finalization completed), Barmer refinery (expected in Q3/Q4 FY18), few Brownfield expansion projects and four fertilizer plants. While overseas Oil & Gas sector continues to be subdued due to soft crude prices, EIL is looking to strengthen its foothold in Middle East/UAE etc. Other Areas outside O&G where EIL is working include Water & waste water treatment, Data centres and initial work in Smart city. With strong order book, execution will see significant pick up during the year. Margin will get impacted due to wage revision impact. Ra ti ng
Accumulate
Pri ce (Rs )
157
Ta rget Pri ce (Rs )
174
M/Ca p (Rs bn)
105.6
Sha res o/s (m)
673.9
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
FY17
FY18E
FY19E
14,486
19,629
24,337
3,022
2,990
4,580
20.9
15.2
18.8
3,282
3,518
4,699
4.9
5.2
7.0
18.8
7.2
33.6
11.9
12.0
14.8
EBITDA
22.5
Margin (%)
32.2
30.0
P / BV (x)
3.7
3.5
3.2
EV / E (x)
18.2
18.3
11.3
Quarterly Table (Rs m) Y/e March
Net Sales
Q1
FY18E
4,033
Q1
FY17
3,418
YoY gr. (%)
18.0
Q4
12M
12M
FY17
FY18E
FY17
4,429 19,629 14,486
803
733
9.6
543
2,990
3,022
YoY gr. (%)
35.5
(1.0)
19.9
21.4
(153)bps
12.3
15.2
20.9
(563)bps
Reported PAT
846
804
5.2
660
3,518
3,282
7.2
PAT (Excl. Ex Items)
846
804
5.2
660
3,518
3,282
7.2
July 11, 2017 63
Apr‐Jun 2017 Earnings Preview
J.Kumar Infraprojects Ra ti ng
BUY
Pri ce (Rs )
304
Ta rget Pri ce (Rs )
We expect sales to grow by 10% YoY to Rs4.3bn driven by pick‐up in execution of metro projects and JNPT orders. The company has a strong order book of Rs100bn and is in the process of focussing on stabilising and executing the current order book. 330
M/Ca p (Rs bn)
23.1
Sha res o/s (m)
75.8
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY19E
19,209
23,694
2,476
3,299
4,141
EBITDA
Margin (%)
17.2
17.2
17.5
1,055
1,323
1,709
13.9
17.5
22.5
7.1
25.4
29.2
8.0
9.4
11.1
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
14,375
RoE (%)
21.9
17.4
13.5
P / BV (x)
PE (x)
1.7
1.6
1.4
EV / E (x)
9.5
7.5
6.1
Quarterly Table (Rs m) Y/e March
Net Sales
Q1
FY18E
4,443
Q1
FY17
4,033
YoY gr. (%)
10.2
Q4
12M
12M
FY17
FY18E
FY17
3,555 19,209 14,375
YoY gr. (%)
33.6
791
680
16.3
602
3,299
2,476
33.2
17.8
16.9
93 bps
16.9
17.2
17.2
(5)bps
Reported PAT
371
297
24.8
263
1,323
1,055
25.4
PAT (Excl. Ex Items)
371
297
24.8
263
1,323
1,055
25.4
Kalpataru Power Transmission We expect sales to grow by 10% YoY to Rs12.6bn as it received inflow in later part of year and hence, execution is likely to be backended. Margin is expected to be stable YoY. KPTL is already L1 in orders worth Rs30bn which reflects healthy inflow for the quarter. KPTL expects 15‐20% growth in sales and margin to remain around 10.5‐
11% in FY18. Ra ti ng
Accumulate
Pri ce (Rs )
338
Ta rget Pri ce (Rs )
382
M/Ca p (Rs bn)
51.9
Sha res o/s (m)
153.5
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
FY19E
57,047
64,463
5,357
6,103
6,897
10.8
10.7
10.7
2,756
3,198
3,540
18.0
20.8
23.1
38.1
16.1
10.7
Quarterly Table (Rs m) Q1
FY18E
12,691
Q1
FY17
11,537
YoY gr. (%)
10.0
1,746
1,308
33.5
1,573
6,103
5,357
13.9
13.8
11.3
242 bps
10.5
10.7
10.8
(10)bps
Reported PAT
1,131
645
75.3
896
3,198
2,756
16.1
1,131
645
75.3
896
3,198
2,756
16.1
Y/e March
Net Sa les
EBITDA
Margin (%)
Q4
12M
12M
FY17
FY18E
FY17
14,963 57,047 49,606
YoY gr. (%)
15.0
RoE (%)
11.8
12.5
12.6
PAT (Excl . Ex Items )
PE (x)
18.8
16.2
14.7
Operating Metrics
P / BV (x)
2.1
1.9
1.8
Order Book (Rs m)
93,309
83,000
12.4
94,000
111,006
94,893
17.0
EV / E (x)
10.9
9.6
8.3
Order Fl ow (Rs m)
12,000
13,500
(11.1)
19,150
73,160
62,000
18.0
FY17
49,606
July 11, 2017 64
Apr‐Jun 2017 Earnings Preview
KEC International Ra ti ng
Buy
Pri ce (Rs )
271
Ta rget Pri ce (Rs )
302
M/Ca p (Rs bn)
69.8
Sha res o/s (m)
257.0
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY19E
85,884
99,028
113,882
8,182
9,371
10,776
9.5
9.5
9.5
3,047
3,568
4,223
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
We expect sales growth to be 10% YoY at Rs19.2bn. Margins are likely to improve YoY due to improved margin in railway and cable businesses. KEC is already L1 in orders worth Rs33bn. In domestic markets, traction in orders from SEB continues to be strong (TN/Orissa/Up/WB/AP/Telangana etc). Outlook on international market also continues to improve and KEC has strengthened footprints across the existing and new geographies and successfully re‐entered eight new countries last year. KEC has guided for a sales growth of 15% and margin of 9.5% for FY18. KEC believes Solar/Railways/Sub‐station/Civil segments could be important growth drivers for the company, going ahead. Quarterly Table (Rs m) Net Sa les
17,487
2,144
11.1
Reported PAT
43.3
3,011
9,371
8,182
14.5
10.6
9.5
9.5
(6)bps
964
309
211.7
1,456
3,568
3,047
17.1
964
309
211.7
1,456
3,568
3,047
17.1
Order Book
136,736
104,030
31.4
126,310
168,124
126,310
33.1
Order Fl ow
29,663
28,250
5.0
57,975
135,938
125,355
8.4
18.9
18.9
18.7
PAT (Excl . Ex Items )
Operating Metrics
P / BV (x)
4.1
3.4
2.8
EV / E (x)
10.6
9.3
8.1
KSB Pumps Ra ti ng
Accumulate
Pri ce (Rs )
798
Ta rget Pri ce (Rs )
785
M/Ca p (Rs bn)
27.8
Sha res o/s (m)
34.8
85,884
YoY gr. (%)
259 bps
18.4
99,028
12M
FY17
8.6
Margin (%)
17.1
16.5
12M
FY18E
1,496
EBITDA
59.1
19.6
Q4
FY17
28,492
16.4
22.9
YoY gr. (%)
10.0
13.9
PE (x)
Q1
FY17
19,236
11.9
RoE (%)
Q1
FY18E
Y/e March
15.3
We expect sales growth of 3% YoY led by steady demand from irrigation and O&G. In the projects business (~50% of sales), the outlook on power continues to remain weak, while the Oil& Gas market looks promising with lot of downstream companies lining up expansion plans. The company is also looking to aggressively grow its standard product business (CY16 saw 25% growth) with the introduction of new products and increased dealer network to support growth. KSB is looking at launching solar pumps and stainless steel submersible pumps in CY17, grow by ~10% for CY17 and maintain double digit growth rates for the next 2‐3 years. Key Figures (Rs m) Y/e Dec
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
CY16
CY17E
CY18E
8,279
9,107
10,291
992
1,294
1,644
12.0
14.2
16.0
626
824
1,060
18.0
23.7
30.5
(10.3) 31.5
28.7
RoE (%)
11.2
13.6
15.6
PE (x)
44.3
33.7
26.2
4.9
4.3
3.9
P / BV (x)
EV / E (x)
July 11, 2017 26.7
20.4
15.9
Quarterly Table (Rs m) Y/e Dec
Net Sales
EBITDA
Margin (%)
Q2
CY17E
2,097
Q2
CY16
2,036
YoY gr. (%)
3.0
Q1
H1
H1
CY17
CY17E
CY16
2,054 4,151 4,142
YoY gr. (%)
0.2
210
243
(13.7)
203
413
493
(16.3)
10.0
11.9
(194)bps
9.9
9.9
11.9
(197)bps
Reported PAT
125
160
(22.0)
133
258
314
(17.9)
PAT (Excl. Ex Items)
125
160
(22.0)
133
258
314
(17.9)
65
Apr‐Jun 2017 Earnings Preview
Larsen & Toubro Ra ti ng
Buy
Pri ce (Rs )
1,732
Ta rget Pri ce (Rs )
We expect sales growth of 7% YoY at Rs234bn, driven by Infrastructure/Services businesses. The company has guided for a 12% sales growth, 12‐14% order inflow growth in FY18. Order announcement stood at ~Rs200bn indicating decent inflow trends for the quarter. 1,900
M/Ca p (Rs bn)
1,613.5
Sha res o/s (m)
931.5
Key Figures (Rs m) Y/e March
Net Sa l es
FY17
FY18E
FY19E
1,100,110 1,232,123 1,416,942
EBITDA
110,747
125,170
148,940
10.1
10.2
10.5
64,855
64,039
75,710
Margin (%)
PAT
EPS (Rs )
Growth (%)
69.6
45.7
RoE (%)
13.1
PE (x)*
68.7
Q1
FY18E
Y/e March
218,738
21,064
9.0
Reported PAT
13.7
PAT (Excl . Ex Items )
Operating Metrics
(1.3) 18.2
19.4
19.7
16.6
P / BV (x)
3.4
3.1
2.7
EV / E (x)
24.0
21.4
18.6
Net Sa les
Q1
FY17
234,050
81.3
12.1
Quarterly Table (Rs m) EBITDA
Margin (%)
Order book
Order infl ow
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
12.0
7.0
368,280
19,052
10.6
43,351
125,170
110,747
13.0
8.7
29 bps
11.8
10.2
10.1
9 bps
9,747
8,564
13.8
34,614
64,039
63,641
0.6
9,747
8,564
13.8
34,614
64,039
64,855
(1.3)
2,704
2,570
5.2
2,613
2,713
2,563
5.9
325
297
9.4
473
1,650
1,430
15.4
1,232,123
1,100,110
* Core PE Power Grid Corporation Capitalization for FY17 stood at Rs310bn flat YoY. PWG commissioned ~10,300ckm of TL, 34695MVA of substation and 15,000MW of inter‐regional capacity in FY17. Capex for FY17 stood at Rs24.4bn, up 8% YoY. PWG has guided for capex of Rs250bn and Capitalization of ~Rs350bn. Ra ti ng
Accumulate
Pri ce (Rs )
211
Ta rget Pri ce (Rs )
214
M/Ca p (Rs bn)
1,105.7
Sha res o/s (m)
5,231.6
Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Quarterly Table (Rs m) Net Sa l es
257,165
286,585
310,966
EBITDA
226,015
260,933
281,718
Y/e March
87.9
91.0
90.6
74,502
86,025
101,279
14.2
16.4
19.4
Margin (%)
PAT
EPS (Rs )
Growth (%)
25.2
15.5
17.7
RoE (%)
16.4
16.9
17.6
PE (x)
14.8
12.9
10.9
P / BV (x)
2.3
2.0
1.8
EV / E (x)
9.5
8.9
8.7
July 11, 2017 Net Sales
Q1
FY18E
67,318
Q1
FY17
61,199
EBITDA
56,904
54,196
5.0
56,185
84.5
88.6
(403)bps
83.7
Reported PAT
18,537
18,018
2.9
19,164
86,025
74,502
15.5
PAT (Excl. Ex Items)
18,537
18,018
2.9
19,164
86,025
74,502
15.5
65
25
164.2
67
185
250
(26.0)
Margin (%)
YoY gr. (%)
10.0
Q4
12M
12M
FY17
FY18E
FY17
67,120 286,585 257,165
260,933
YoY gr. (%)
11.4
226,015
15.4
91.0 87.9
316 bps
Operating Metrics
Capitalization(Rs bn
66
Apr‐Jun 2017 Earnings Preview
Sadbhav Engineering Ra ti ng
BUY
Pri ce (Rs )
296
Ta rget Pri ce (Rs )
Momentum in EPC projects and HAM projects which have come up for execution from Q4FY17 should help decent sales growth in Q1FY18. Momentum in EPC projects and HAM projects coming up for execution should support execution in FY18. SEL expects sales of ~Rs38bn+ and margin of 11% in FY18. 371
M/Ca p (Rs bn)
50.2
Sha res o/s (m)
169.6
Key Figures (Rs m) Y/e March
Quarterly Table (Rs m) FY17
Net Sa l es
FY18E
FY19E
33,203
38,841
44,995
3,556
4,274
4,784
10.7
11.0
10.6
1,878
2,062
2,269
EBITDA
Margin (%)
PAT
EPS (Rs )
Y/e March
Net Sa les
EBITDA
Margin (%)
Q1
FY17
8,070
YoY gr. (%)
13.0
Q4
12M
12M
FY17
FY18E
FY17
10,329 38,841 33,203
YoY gr. (%)
17.0
919
868
5.8
1,096
4,274
3,556
20.2
10.1
10.8
(68)bps
10.6
11.0
10.7
29 bps
Reported PAT
409
487
(16.0)
682
2,062
1,878
9.8
PAT (Excl . Ex Items )
409
487
(16.0)
682
2,062
1,878
9.8
7,108
5,607
26.8
8,237
29,519
25,322
16.6
Irri gia ti on
889
1,684
(47.2)
1,255
5,438
4,580
18.7
Mining
650
723
(10.1)
785
3,496
3,168
10.4
11.1
12.2
13.4
43.9
9.8
10.0
RoE (%)
12.1
11.8
11.7
Operating Metrics
PE (x)
13.4
12.2
11.1
Roa ds
P / BV (x)
3.0
2.7
2.4
EV / E (x)
16.1
13.5
12.3
Growth (%)
Q1
FY18E
9,119
Siemens We expect net sales to be up 6% YoY to Rs27.7bn. SIEM highlighted investments by public sector kept pace with their targets, while private companies’ capex remains muted. Project awards have picked up in Railways and Transmission; Fossil Power Generation and Manufacturing remains stagnant. While railway has seen lot of small/medium tenders coming up in FY16, current year is expected to see large size tenders in area like speed upgradation/electrification/signalling etc. In T&D, while Power Grid Corp continues to drive capex, few SEBs have stepped up spend largely in medium KV space. SIEM highlighted that the competition continues to be intense across segments. Ra ti ng
Accumulate
Pri ce (Rs )
1,362
Ta rget Pri ce (Rs )
1,527
M/Ca p (Rs bn)
484.8
Sha res o/s (m)
356.1
Key Figures (Rs m) Y/e Sep
Net Sa l es
FY16
FY17E
FY18E
108,088
114,074
130,193
9,731
11,978
14,974
9.0
10.5
11.5
5,928
7,356
9,376
16.6
20.7
26.3
3.8
24.1
27.5
RoE (%)
10.9
12.7
15.1
PE (x)
81.8
65.9
51.7
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
P / BV (x)
8.7
8.1
7.5
EV / E (x)
47.9
38.7
30.9
Quarterly Table (Rs m) Y/e Sep
Net Sales
EBITDA
Margin (%)
Q3
FY17
27,776
Q3
FY16
26,204
YoY gr. (%)
6.0
2,639
2,338
12.8
Q2
9M
9M
FY17
FY17E
FY16
29,288 80016.95 77,182
YoY gr. (%)
3.7
2,786
7,783
7,340
6.0
9.5
8.9
58 bps
9.5
19.0
19.2
(18)bps
Reported PAT
1,657
1,300
27.4
1,793
5,070
4,215
20.3
PAT (Excl. Ex Items)
1,657
1,300
27.4
1,793
5,070
4,215
20.3
July 11, 2017 67
Apr‐Jun 2017 Earnings Preview
Thermax M/Ca p (Rs bn)
109.7
Sha res o/s (m)
119.2
We expect weak sales due to low order carry. Order book for the quarter stood at Rs39.6bn (down 14% YoY). While enquiry levels improved in domestic and international markets, order finalization is slow, especially in medium and large projects. In domestic market, seeing consumption‐led sector demand, with sectors like Food/Food processing/Pharma/Textile/Light engineering/Auto Anc etc seeing demand. Outlook on power (except solar) remains weak. TMX is also seeing some improvement in cement sector ordering outlook. FY19E
Quarterly Table (Rs m) Ra ti ng
Accumulate
Pri ce (Rs )
921
Ta rget Pri ce (Rs )
1,052
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
51,796
61,509
4,330
5,157
6,401
9.7
10.0
10.4
2,340
3,065
4,179
EBITDA
Margin (%)
PAT
EPS (Rs )
19.6
Growth (%)
FY18E
44,831
Y/e March
Q1
FY18E
Net Sa les
7,738
8,145
EBITDA
713
Margin (%)
9.2
Reported PAT
13.3
PAT (Excl . Ex Items )
Operating Metrics (Rs m)
25.7
35.1
(17.1) 31.0
36.3
RoE (%)
9.0
PE (x)
10.6
46.9
35.8
26.3
P / BV (x)
4.0
3.7
3.3
EV / E (x)
22.4
18.8
15.2
Order book
Order Infl ow
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
51,796
12M
FY17
44,831
YoY gr. (%)
(5.0)
13,428
15.5
637
11.9
1,521
5,157
4,330
19.1
7.8
139 bps
11.3
10.0
9.7
30 bps
528
452
16.7
1,161
3,065
2,340
31.0
528
452
16.7
1,161
3,065
2,340
31.0
41,222
46,500
(11.3)
39,760
45,421
39,760
14.2
9,200
8,200
12.2
11,700
49,731
45,210
10.0
Voltas We expect sales to be down 0.6% YoY to Rs18.3bn. We expect AC sales to be down 6% YoY led by GST‐related destocking. Margins will be down YoY due to significantly high margins in the UCP segment during the same quarter last year. Margin in MEP segment will improve YoY as legacy project gets over. Ra ti ng
Accumulate
Pri ce (Rs )
467
Ta rget Pri ce (Rs )
510
M/Ca p (Rs bn)
154.4
Sha res o/s (m)
330.7
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
FY18E
FY19E
60,328
69,109
78,942
5,791
6,635
7,500
9.6
9.6
9.5
5,296
5,620
5,976
Y/e March
Net Sa les
EBITDA
Margin (%)
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
18,393
18,500
(0.6)
20,351
69,109
60,328
14.6
1,582
1,995
(20.7)
2,219
6,635
5,791
14.6
8.6
10.8
(219)bps
10.9
9.6
9.6
0 bps
1,576
(18.6)
2,005
5,620
5,296
6.1
PAT (Excl . Ex Items )
1,282
1,567
(18.2)
2,003
5,620
5,296
6.1
5,976
5,802
3.0
8,290
30,430
26,550
14.6
705
691
2.0
1,068
3,650
3,318
10.0
11,717
11,956
(2.0)
10,860
35,039
30,469
15.0
18.1
50.7
6.1
6.3
RoE (%)
20.4
18.9
17.7
Operating Metrics
PE (x)
29.2
27.5
25.8
MEP
P / BV (x)
5.5
4.9
4.3
EV / E (x)
26.3
22.5
19.5
July 11, 2017 Q1
FY17
1,282
17.0
Q1
FY18E
Reported PAT
16.0
Growth (%)
Quarterly Table (Rs m) FY17
Engineeri ng Product UCP
68
Apr‐Jun 2017 Earnings Preview
Kamlesh Bagmar [email protected] +91‐22‐6632 2237 Cement Top picks All‐India cement prices were up by 9% QoQ or Rs26/bag (+6.8% YoY or Rs20/bag) due to low base. West witnessed the highest improvement; prices were up 17.6% or Rs45/bag QoQ (+12%/Rs32/bag YoY) due to strong discipline and unfeasible base. Prices in the East region were up by 12% QoQ or Rs35/bag (+11.2% or Rs33/bag YoY). Prices in North, Central and South also showed recovery trends after a hit in the previous quarter due to demonetisation. Prices in North were up by Rs6.7% or Rs20/bag QoQ; Central were up by 5.6% QoQ or Rs16/bag; South prices were up by 4.8% or Rs16//bag QoQ. Ambuja Cement 
North ‐ Price cuts not meaningful: Owing to weakness in demand, prices slipped marginally by Rs10/bag (Gross basis) in May out of total hike of Rs40/bag. We expect an increase of Rs20/bag QoQ in region’s average for Q1FY18. 
South ‐ Discipline kicks in to support prices: Prices in TN remained flat due to shortage of sand. Kerala witnessed marginal increase of Rs10/bag as demand continued to contract due to depressed housing demand. Prices in AP/Telangana/Karnataka rose by Rs30/bag QoQ on the back of tight discipline and unviable levels in Q4. We expect region’s average to increase by Rs15 a bag QoQ. 
East ‐ Prices firm after a long time: Prices in East have been weak for the last two years due to large capacity addition. Thanks to strong demand and stabilisation of new entrant’s market share, prices witnessed strong revival from April onwards. Region’s average is expected to increase by Rs30/bag QoQ. 
West ‐ Multi‐year low prices in Q4 drive the sharp hike: Prices slumped to six‐year low in Gujarat in Q4 due to intense competition and rivalry between players. Steep fall in earnings (Gujarat based players’ EBITDA fell by ~60% YoY in Q4FY17) drove rebound in prices. We expect an increase of Rs40/bag QoQ for state’s average in Q1. Aided by better discipline and higher prices in Karnataka/AP, prices in Maharashtra rose by Rs30/bag QoQ. Amit Khimesra [email protected] +91‐22‐6632 2244 JK Lakshmi Cement Heidelberg Cement India 380 365 350 335 320 305 290 275 260 245 230 North
South
West
Central
East
Apr‐15
May‐15
Jun‐15
Jul‐15
Aug‐15
Sep‐15
Oct‐15
Nov‐15
Dec‐15
Jan‐16
Feb‐16
Mar‐16
Apr‐16
May‐16
Jun‐16
Jul‐16
Aug‐16
Sep‐16
Oct‐16
Nov‐16
Dec‐16
Jan‐17
Feb‐17
Mar‐17
Apr‐17
May‐17
Jun‐17
Rs/50kg bag
Region‐wise prices Source: Industry, PL Research July 11, 2017 69
Apr‐Jun 2017 Earnings Preview
Cement demand slowed down in June with PL growth estimate of 3% (PLe: +10%/+6% in April/May) primarily due to aggravating shortage of sand/additives. Tamil Nadu (TN), UP, Punjab and Maharashtra (these states together constitute 1/3rd of India’s demand) were hit the most due to the shortage. Prices of sand and other mineral additives skyrocketed in the past couple of months with an increase of ~3x. Supplies were hit due to strong action initiated by states against illegal mining. We see gradual resumption of these mines in the next couple of months as states are expediting the auction process. Punjab just completed the auction with capacity of 13m tonnes. UP auctioned mines with capacity of 20m tonnes in the last week of June. We see the current weakness as temporary impact of structural reform in sand mining. We remain upbeat on cement demand as Govt’s spending on affordable housing and infrastructure development continues to gather pace and would become pronounced in H2 as quantum of spending and reach would grow multi‐fold. We expect earnings of our coverage universe to grow by 0.5% YoY for the quarter due to higher volumes and better pricing partially negated by higher energy and freight costs. We maintain our Overweight outlook, underpinned by strong demand outlook and limited capacity additions. We like Ambuja Cement (ACEM), given its play on sizeable and efficient operations. In mid‐caps, we continue to like JK Lakshmi cement on the back of its efficient operations and play on large capacity base and HeidelbergCement, on the back of attractive valuations and strong earnings outlook. Stock Performance Absolute
1M
3M
Relative to Sensex
6M
12M
1M
3M
12M
ACC
0.3
10.6
23.1
1.9
5.2
(15.0)
Ambuja Cement
8.3
4.2
21.2
(1.2) 6.8
(3.1) 3.3
(18.1)
Hei del berg Cement Indi a
1.2
5.8
17.7
17.4
(0.2)
(1.5)
JK La ks hmi Cement
(2.1) 4.7
32.5
18.3
(3.5)
(2.5) 14.6
1.4
Shree Cement
0.7
3.6
27.2
17.6
(0.7)
(3.7) 9.3
0.7
The Ra mco Cements
(0.6) 4.8
17.3
22.8
(2.0)
(2.5)
Ul tra tech Cement
0.7
26.2
21.9
(0.8)
(5.1) 8.3
2.1
(1.1) 3.4
6M
(0.2) 0.5
(0.6) 5.9
5.0
Source: Bloomberg, PL Research July 11, 2017 70
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
ACC
Ambuja Cement
Q1FY18E
Shree Cement
The Ra mco Cements
Ul tra tech Cement
12MFY17 YoY gr. (%)
15.0
30,997
6.4
63,986
57,426
11.4
EBITDA
4,371
4,102
6.6
3,424
27.6
7,795
7,887
(1.2)
Margins (%)
13.2
14.3
220 bps 12.2
13.7
(155)bps
PAT
2,666
2,391
11.5
2,111
26.3
4,776
4,708
1.5
Sa l es
27,834
25,412
9.5
25,334
9.9
53,168
49,471
7.5
EBITDA
5,735
5,813
(1.3) 3,651
57.1
9,386
10,068
(6.8)
Margins (%)
20.6
22.9
(227)bps 14.4
619 bps 17.7
20.4
(270)bps
PAT
3,514
3,995
(12.0) 2,465
42.5
5,979
4,319
38.4
Sa l es
5,035
4,618
9.0
4,538
11.0
18,947
16,876
12.3
749
799
(6.3) 701
6.8
3,223
2,490
29.4
(58)bps 17.0
(104)bps 11.0
14.9
17.3
14.8
225 bps
PAT
270
263
2.8
266
1.4
1,304
759
71.8
Sa l es
8,761
7,772
12.7
8,067
8.6
33,764
29,104
16.0
EBITDA
1,038
1,175
(11.7) 716
45.0
4,854
3,654
32.8
Margins (%)
11.8
15.1
(327)bps 8.9
297 bps 14.4
12.6
182 bps
PAT
166
286
(41.9) 208
(20.2) 1,559
820
90.1
Sa l es
25,689
21,987
16.8
23,803
7.9
94,748
84,292
12.4
EBITDA
6,296
7,308
(13.8) 5,112
23.2
26,670
23,672
12.7
(243)bps 15.5
303 bps 28.1
Margins (%)
24.5
33.2
(873)bps 21.5
28.1
6 bps
PAT
3,346
5,077
(34.1) 3,045
9.9
15,969
13,391
19.3
Sa l es
9,953
9,429
5.6
(1.8) 42,896
38,569
11.2
EBITDA
2,638
2,750
(4.1) 2,396
10.1
11,284
10,837
4.1
Margins (%)
26.5
29.2
(266)bps 23.6
287 bps 26.3
28.1
(179)bps
PAT
1,593
1,559
2.1
1,345
18.4
6,514
6,493
0.3
Sa l es
69,143
61,823
11.8
64,956
6.4
330,564
256,660
28.8
EBITDA
14,919
13,723
8.7
11,786
26.6
65,716
50,539
30.0
Margins (%)
21.6
22.2
343 bps 19.9
19.7
19 bps
PAT
8,833
7,749
10,132
(62)bps 18.1
14.0
ACC & Ambuja Cement ‐ Y/e Dec; July 11, 2017 12MFY18E
28,698
Source: Company Data, PL Research Q4FY17 QoQ gr. (%)
32,990
Hei del berg Cement EBITDA
Indi a
Margins (%)
JK La ks hmi Cement
Q1FY17 YoY gr. (%)
Sa l es
7,020
25.8
26,317
27,261
(3.5) Shree Cement ‐ Y/e Jun 71
Apr‐Jun 2017 Earnings Preview
Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) 2017
2018E
2019E
Apr‐Jun'17
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
Net Sales
651,347
776,484
907,185
Net Sa l es
179,404
159,739
12.3
167,827
6.9
Growth (%)
26.1
19.2
16.8
EBITDA
35,747
35,671
0.2
27,785
28.7
EBITDA
114,892
140,508
182,616
Margin (%)
19.9
22.3
(241)bps
16.6
337 bps
Margin (%)
17.6
18.1
20.1
PAT (Excl . Ex Items )
20,388
21,321
(4.4) 16,461
23.9
PAT
58,382
65,851
95,718
Growth (%)
39.5
12.8
45.4
44.3
39.3
27.0
PE (x)
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. ACC Ra ti ng
Accumulate
Pri ce (Rs )
1,628
Ta rget Pri ce (Rs )
1,800
M/Ca p (Rs bn)
306.0
Sha res o/s (m)
188.0
Net revenue is expected to grow 15% YoY at Rs32.9bn largely due to 9% YoY increase in volume at 6.7mt and 23% YoY (rise 5.8%/Rs292/t QoQ) growth in realization at Rs5,334/t. Cost/t is expected to grow by 27.4%/Rs1,007/t YoY at Rs4,678 mainly due to higher freight and energy costs. Due to higher costs, EBITDA/t is expected to fall 2.2%/Rs15 YoY at Rs655/t. PAT is expected to grow 11.5% YoY at Rs2.7bn. Key Figures (Rs m) Y/e Dec
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
CY17E
CY18E
109,456
124,385
141,405
11,988
14,496
19,659
11.0
11.7
13.9
6,299
8,277
12,602
33.5
44.0
67.0
(0.7) 31.4
52.3
Y/e Dec
Net Sales
EBITDA
Margin (%)
4,371
4,102
6.6
Q1
H1
H1
CY17
CY17E
CY16
30,997 63,986 57,426
3,424
7,795
YoY gr. (%)
11.4
7,887
(1.2)
14.3
(104)bps
11.0
12.2
13.7
(155)bps
2,391
11.5
2,111
4,776
4,708
1.5
PAT (Excl. Ex Items)
2,666
2,391
11.5
2,111
4,776
4,708
1.5
6.7
6.1
9.0
6.6
13.3
12.5
6.3
5,333
4,341
22.9
5,041
10,374
9,134
13.6
655
670
(2.2)
519
1,174
1,265
(7.2)
Operating Metrics
48.6
37.0
24.3
Volume (mn te)
P / BV (x)
3.5
3.4
3.3
Net Real. (Rs/te)
EV / E (x)
24.0
19.5
13.9
July 11, 2017 YoY gr. (%)
15.0
13.2
13.8
Q2
CY16
28,698
2,666
9.4
PE (x)
Q2
CY17E
32,990
Reported PAT
7.4
RoE (%)
Quarterly Table (Rs m) CY16
EBITDA (Rs/ te)
72
Apr‐Jun 2017 Earnings Preview
Ambuja Cement Ra ti ng
BUY
Pri ce (Rs )
255
Ta rget Pri ce (Rs )
280
M/Ca p (Rs bn)
505.4
Sha res o/s (m)
1,985.7
Net revenue is expected to grow 9.5% YoY to Rs27.8bn, due to 3.7% YoY increase in volumes at 6.1mt and rise in realizations by 5.6%/Rs243/t YoY (rise 9.3%/Rs393/t QoQ) at Rs4,587/t. Owing to high freight and energy cost, cost/t is expected to rise by 8.6% YoY (Rs292/t). Due to higher costs, EBITDA/t is expected to fall 4.9%/Rs49 YoY to Rs945. PAT is likely to fall 12% YoY to Rs3.5bn. Key Figures (Rs m) Y/e Dec
Net Sa l es
CY17E
CY18E
200,940
226,786
255,530
28,693
33,626
43,023
14.3
14.8
16.8
11,431
15,288
20,629
5.8
7.7
10.4
3.5
33.7
34.9
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
Quarterly Table (Rs m) CY16
RoE (%)
PE (x)
P / BV (x)
EV / E (x)
7.7
7.7
9.9
44.2
33.1
24.5
2.6
2.5
2.4
16.1
13.4
10.1
Y/e Dec
Net Sales
EBITDA
Margin (%)
Q2
CY17E
27,834
Q2
CY16
25,412
YoY gr. (%)
9.5
5,735
5,813
(1.3)
Q1
H1
H1
CY17
CY17E
CY16
25,334 53,168 49,471
3,651
9,386
YoY gr. (%)
7.5
10,068
(6.8)
20.6
22.9
(227)bps
14.4
17.7
20.4
(270)bps
Reported PAT
3,514
3,995
(12.0)
2,465
5,979
4,530
32.0
PAT (Excl . Ex Items )
3,514
3,995
(12.0)
2,465
5,979
4,319
38.4
6.1
5.9
3.7
6.0
12.1
11.8
2.5
4,587
4,344
5.6
4,194
8,781
8,376
4.8
945
994
(4.9)
604
1,550
1,707
(9.2)
Operating Metrics
Standalone vol
Net Real. (Rs/te)
Standalone EBITDA/ Heidelberg Cement India Net revenue is expected to grow 9% YoY at Rs5bn largely due to a 5% YoY growth in volumes at 1.3m tones. Realizations grew by 3.8%/Rs146/t YoY (rise 4.9%/Rs183/t QoQ) at Rs3,934. Cost/t is expected to grow 6.9%/Rs216/t YoY due to rise in energy cost and freight cost. Backed by higher costs, EBITDA/t is expected to fall 10.7%/Rs70 YoY at Rs585. EBITDA is expected to fall 6.3% YoY at Rs749m. Company is expected to post 2.8% YoY growth in PAT to Rs270m. Ra ti ng
BUY
Pri ce (Rs )
134
Ta rget Pri ce (Rs )
160
M/Ca p (Rs bn)
30.3
Sha res o/s (m)
226.6
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
Net Sa l es
16,876
EBITDA
Margin (%)
FY18E
18,947
FY19E
21,084
2,490
3,223
3,910
14.8
17.0
18.5
Y/e March
Q1
FY18E
Net Sales
5,035
EBITDA
Margin (%)
16,876
YoY gr. (%)
12.3
749
799
(6.3)
701
3,223
2,490
29.4
14.9
17.3
(243)bps
15.5
17.0
14.8
225 bps
263
2.8
370
1,304
762
71.1
263
2.8
266
1,304
759
71.8
EPS (Rs )
3.3
5.8
8.3
Operating Metrics
93.1
71.8
44.5
8.4
13.7
17.8
Vol ume (mn te)‐
Cement
39.9
23.2
16.1
P / BV (x)
3.3
3.1
2.7
EV / E (x)
15.5
11.4
8.8
Cement Realis ation (Rs/te)
EBITDA (Rs/ te)
July 11, 2017 18,947
12M
FY17
270
1,884
4,538
12M
FY18E
270
1,304
PE (x)
9.0
Q4
FY17
Reported PAT
759
RoE (%)
4,618
YoY gr. (%)
PAT (Excl. Ex Items)
PAT
Growth (%)
Q1
FY17
1.3 1.2 5.0 1.2 4.9 4.5 9.0 3,934 3,788 3.8 3,750 3,888 3,774 3.0 585 656 (10.7)
580 661 557 18.7 73
Apr‐Jun 2017 Earnings Preview
JK Lakshmi Cement Ra ti ng
BUY
Pri ce (Rs )
470
Ta rget Pri ce (Rs )
630
M/Ca p (Rs bn)
55.3
Sha res o/s (m)
117.7
Net revenue is expected to grow 12.7% YoY to Rs8.7bn on account of 7.4% YoY growth in volumes and 4.9%/Rs181/t YoY (rise of 9.6%/Rs337/t QoQ) increase in realizations at Rs3,859/t. Driven by higher energy cost, Cost/t is expected to rise 9%/Rs280/t YoY at Rs3,402 and EBITDA/t is expected to fall 17.8%/Rs99 YoY at Rs457. EBITDA is expected to fall by 11.7% YoY to Rs1bn. PAT is likely to fall 42% to Rs166m. Quarterly Table (Rs m) Y/e March
FY17
Net Sa l es
FY18E
FY19E
29,104
33,764
38,813
3,654
4,854
7,223
12.6
14.4
18.6
EBITDA
Margin (%)
PAT
820
1,559
3,506
EPS (Rs )
7.0
13.2
29.8
(1,695.6) 90.1
125.0
Growth (%)
RoE (%)
6.0
10.6
21.2
67.5
35.5
15.8
P / BV (x)
3.9
3.6
3.1
EV / E (x)
19.5
14.3
9.1
PE (x)
Net Sales
Q1
FY18E
8,761
Q1
FY17
7,772
YoY gr. (%)
12.7
EBITDA
1,038
1,175
(11.7)
716
4,854
3,654
32.8
11.8
15.1
(327)bps
8.9
14.4
12.6
182 bps
Y/e March
Key Figures (Rs m) Margin (%)
Q4
12M
12M
FY17
FY18E
FY17
8,067 33,764 29,104
YoY gr. (%)
16.0
Reported PAT
166
286
(41.9)
208
1,559
820
90.1
PAT (Excl. Ex Items)
166
286
(41.9)
208
1,559
820
90.1
Operating Metrics
Grey Cement Vol . (mn te)
Cement Realis ation (Rs/te)
EBITDA (Rs/ te)
2.3 2.1 7.4 2.3 8.8 8.0 10.3 3,859 3,678 4.9 3,523 3,850 3,667 5.0 457 556 (17.8)
312 553 460 20.4 Shree Cement Cement revenue is expected to rise 16.8% YoY on the back of 15.3% YoY growth in cement volumes at 6m tonnes and 5.7%/Rs219/t YoY (rise 8%/Rs304/t QoQ) increase in net realizations at Rs4,074. Cost/t expected to increase by 17.7% YoY/Rs459 due to higher raw material and energy costs, cement EBITDA/t is expected to fall 19.1% YoY to Rs1,021m. Blended EBITDA is expected to fall 13.8% YoY to Rs6.3bn. Ra ti ng
Accumulate
Pri ce (Rs )
18,272
Ta rget Pri ce (Rs )
20,600
M/Ca p (Rs bn)
636.6
Sha res o/s (m)
34.8
Quarterly Table (Rs m) Y/e March
Key Figures (Rs m) Y/e March
Net Sales
FY17
FY18E
FY19E
EBITDA
Margin (%)
Q1
FY18E
12M
FY17
YoY gr. (%)
16.8
23,803
94,748
84,292
12.4
7,308
(13.8)
5,112
26,670
23,672
12.7
24.5
33.2
(873)bps
21.5
28.1
28.1
6 bps
116,187
EBITDA
23,672
26,670
34,492
28.1
28.1
29.7
13,391
15,969
20,965
384.4
458.3
661.9
233.2
19.3
44.4
RoE (%)
20.7
22.1
25.0
Net Real . (Rs/te)
4,074
PE (x)
47.5
39.9
27.6
Cmnt. EBITDA (Rs /te)
1,021
P / BV (x)
9.5
8.3
6.4
Cement EBITDA
6,086
EV / E (x)
25.9
22.9
17.4
210
Growth (%)
12M
FY18E
21,987
94,748
EPS (Rs )
Q4
FY17
6,296
84,292
PAT
YoY gr. (%)
25,689
Net Sa l es
Margin (%)
Q1
FY17
Reported PAT
3,346
5,077
(34.1)
3,045
15,969
13,391
19.3
PAT (Excl. Ex Items)
3,346
5,077
(34.1)
3,045
15,969
13,391
19.3
Vol . (m te)‐Cement
6.0
5.2
15.3
5.9
23.3
20.2
15.7
Vol . (m uni ts )‐Power
420
608
(30.9)
434
1,569
1,523
3.0
3,855
5.7
3,771
3,823
3,712
3.0
1,262
(19.1)
818
1,096
1,104
(0.8)
6,524
(6.7)
4,852
25,577
22,282
14.8
784
(73.2)
260
1,093
1,390
(21.4)
Operating Metrics
Power EBITDA
July 11, 2017 74
Apr‐Jun 2017 Earnings Preview
The Ramco Cements Ra ti ng
BUY
Pri ce (Rs )
710
Ta rget Pri ce (Rs )
780
M/Ca p (Rs bn)
167.1
Sha res o/s (m)
235.5
Net revenue is expected to increase 5.6% YoY due to 3% YoY increase in volume at 2.1mt and 2.5%/Rs113 YoY (4.6%/Rs205 QoQ) rise in realizations at Rs4,655. Cost/t is expected to increase 6.3%/Rs204/t YoY to Rs3,421 due to higher energy costs, EBITDA/t is expected to fall by 6.9%/Rs91/t YoY at Rs1,234. Company is expected to post PAT at Rs1.6bn, a growth of 2.1% YoY. Quarterly Table (Rs m) Net Sales
Q1
FY18E
9,953
Q1
FY17
9,429
EBITDA
2,638
2,750
(4.1)
2,396
26.5
29.2
(266)bps
23.6
Y/e March
Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
YoY gr. (%)
5.6
Q4
12M
12M
FY17
FY18E
FY17
10,132 42,896 38,569
11,284
10,837
YoY gr. (%)
11.2
4.1
Net Sa l es
38,569
42,896
47,938
Margin (%)
EBITDA
10,837
11,284
12,689
Reported PAT
1,593
1,559
2.1
1,345
6,514
6,493
0.3
PAT (Excl. Ex Items)
1,593
1,559
2.1
1,345
6,514
6,493
0.3
Margin (%)
28.1
26.3
26.5
6,493
6,514
7,722
Operating Metrics
27.3
27.7
32.8
29.6
1.5
18.5
Grey Cement Vol. (mn te)
RoE (%)
19.2
17.0
17.9
PE (x)
26.0
25.7
21.6
P / BV (x)
4.6
4.2
3.6
EV / E (x)
16.7
15.8
13.7
PAT
EPS (Rs )
Growth (%)
26.3 28.1 (179)bps
2.1 2.1 3.0 2.3 9.0 8.4 8.0 Cement Real.‐
Cement (Rs/te)
4,655 4,542 2.5 4,450 4,699 4,563 3.0 Cement EBITDA (Rs/te)
1,234 1,325 (6.9)
1,052 1,248 1,294 (3.6)
UltraTech Cement Ra ti ng
Accumulate
Pri ce (Rs )
4,144
Ta rget Pri ce (Rs )
4,560
M/Ca p (Rs bn)
1,137.2
Sha res o/s (m)
274.4
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
Quarterly Table (Rs m) Y/e March
Key Figures (Rs m) Y/e March
Blended realizations are expected to rise 7.4%/Rs306 YoY (rise 9.4%/Rs384 QoQ) to Rs4,436/t. Overall volumes are expected to grow 6.3% YoY at 13.6m tonnes Net revenues expected to increase by 11.8% YoY to Rs69.1bn. Cost/t is expected to increase 6.2% YoY at Rs3,872 due to higher energy costs. EBITDA/t is expected to grow 2.4%/Rs25 (rise 27%/Rs.227 QoQ) to Rs1,065. Hence, EBITDA is likely to increase 8.7% YoY to Rs14.9bn. PAT is expected to grow by 14% YoY to Rs8.8bn. FY17
FY18E
FY19E
Q1
FY18E
Q1
FY17
Net Sales
69,143
61,823
EBITDA
14,919
21.6
Reported PAT
PAT (Excl. Ex Items)
YoY gr. (%)
Q4
FY17
12M
FY18E
330,564
12M
FY17
256,660
YoY gr. (%)
11.8
64,956
28.8
13,723
8.7
11,786
65,716
50,539
30.0
22.2
(62)bps
18.1
19.9
19.7
19 bps
8,833
7,749
14.0
7,020
26,317
27,261
(3.5)
8,833
7,749
14.0
7,020
26,317
27,261
(3.5)
256,660
330,564
394,062
50,539
65,716
85,442
19.7
19.9
21.7
27,261
26,317
41,522
Operating Metrics
99.3
95.9
151.3
Grey Cement Vol . (mn te)
13.6 12.8 6.3 13.7 62.0 48.5 27.9 Grey Cement Real . (Rs/te)
4,436 4,130 7.4 4,052 4,236 4,054 4.5 Bl ended EBITDA/tonne (Rs)
1,065 1,040 2.4 838 992 969 2.4 19.2
(3.5) 57.8
RoE (%)
12.2
10.7
15.1
PE (x)
41.7
43.2
27.4
P / BV (x)
4.8
4.4
3.9
EV / E (x)
23.5
20.2
15.1
Margin (%)
July 11, 2017 75
Apr‐Jun 2017 Earnings Preview
Amnish Aggarwal [email protected] +91‐22‐6632 2233 Gaurav Jogani [email protected] +91‐22‐6632 2238 Top picks Britannia Industries ITC Consumer Q1FY18 Adj. PAT to increase 7% on subdued volume growth We estimate Q1FY18E volume growth to be impacted due to disruption ahead of GST for most companies in our coverage universe. EBITDA is expected to increase by 7% even as margins decline by 44bps due to subdued volume growth and rising input costs. We estimate 7% increase in aggregate PAT as DABUR, JUBI, HMN, NEST and MRCO are expected to report PAT decline, while BRIT, SKB, and PIDI are expected to post low‐to‐mid single digit PAT growth. GST dilemma puts breaks on demand recovery Rural demand recovering, Farm loan waiver to provide further fillip: Rural demand had started seeing some green shoots after being under pressure for the last couple of years. Current demand conditions have started improving post demonetisation. Farm loan waivers, increase in MSP and normal monsoons will provide fillip to volumes post Q2FY18. Rural demand was growing slower than urban demand last year and is not growing substantially faster now; we expect the scenario to change in the coming quarters. GST to be a near term pain: GST, a landmark tax reform in Indian history is getting implemented from July 1, 2017. We believe there will be near term de‐stocking across product segments which can impact sales of 5‐7 days in Q1FY18. However, the impact on the wholesale and distributor inventory and long distribution chain will be known only in the coming few weeks. While large manufacturers are largely ready for the implementation, the readiness at the distributor, wholesaler and retailer level is still incomplete. In addition, there is an uncertainty on tax treatment of the stock levels on the 30th June which has reduced off take from trade at the end of June‘17. In the long run, while the organised sector is expected to gain, the extent of benefit and its impact will be felt over the next 2‐3 quarters. Agri/ crude linked commodities turn softer QoQ Majority of the Agri commodities prices have declined sharply from Q4FY17 levels. Wheat, Palm‐oil, Barley, SMP and Sugar prices are down 12.2%, 15.9%, 13.4%, 6.5% and 0.8% QoQ, respectively. Milk prices are expected to see some inflation with the rise in procurement prices by Rs3/ltr (Maharashtra) on the back on Rs2/ltr in Q4FY17. Sugar prices are stable close to their peak, while Copra continues to remain firm and is up 3.8% QoQ and 57.4% YoY. We believe that most of the agri commodity prices have peaked out and normal monsoon will help sustain benign input cost environment for the coming few quarters. July 11, 2017 76
Apr‐Jun 2017 Earnings Preview
Crude price are trending at the lower end of its recent range of US$45‐55/barrel and are down 7% QoQ. Q1 Average VAM prices (China) were US$895/ton, up 2.5% QoQ and down 1.4% YoY. Titanium dioxide prices have seen sharp upsurge in prices and is up 26% YoY and 15.3% QoQ. HDPE prices are up 0.3% QoQ and down 3.3% YoY, LAB prices are down 0.7% QoQ and up 9% YoY. We note that crude prices have started correcting once again after making recent highs of US$56.5 and this should help in keeping the price of crude derivative products benign. Britannia and ITC are Top Picks Britannia Industries: BRIT is expected to enter a phase of margin expansion in the coming quarters as major inputs like Wheat, Palm oil and SMP have turned benign; sugar is unlikely to see sharp inflation like last year. BRIT will see pick‐up in volume growth led by distribution expansion in Hindi heartland, benefits of monsoons and farm loan waivers and GST gains. Although we expect an increase in advertising, we estimate 150bps margin expansion over FY17‐19 beginning Q2FY18. We estimate 20% PAT CAGR over FY17‐19. The stock trades at 34xFY19 standalone EPS. We maintain ‘BUY’ with an 18‐month target price of Rs4255. ITC: 8‐10% tax reduction under GST to re‐rate the stock ITC will gain from 8‐10% tax reduction under GST regime even as all local and state level taxes get subsumed in GST. Uniform taxation throughout the country and lower prices on an average are positive. We estimate that prices will come down in states accounting for 55% of ITC sales, while they will increase in the balance. Non‐
cigarette businesses like Paper, Hotel etc. are at the bottom of cycle and should increase contribution in the coming years. We estimate 5% volume growth and 16% cigarette EBIT growth over FY17‐20. We increase P/E multiple from 30 to 3x and arrive at a target price of Rs400 for 15‐month period. Buy July 11, 2017 77
Apr‐Jun 2017 Earnings Preview
LAB: Q1FY18 prices up 9% YoY and down 0.7% QoQ 138.1
140.0
Lab prices have remained flat QoQ, while 130.0
lower crude oil prices are expected to
120.0
(Rs/Kg)
remain in a range
112.1
110.0
103.1
110.1
100.0
102.1
90.0
96.1
80.0
84.1
70.0
Sep‐10
Nov‐10
Jan‐11
Mar‐11
May‐11
Jul‐11
Sep‐11
Nov‐11
Jan‐12
Mar‐12
May‐12
Jul‐12
Sep‐12
Nov‐12
Jan‐13
Mar‐13
May‐13
Jul‐13
Sep‐13
Nov‐13
Jan‐14
Mar‐14
May‐14
Jul‐14
Sep‐14
Nov‐14
Jan‐15
Mar‐15
May‐15
Jul‐15
Sep‐15
Nov‐15
Jan‐16
Mar‐16
May‐16
Jul‐16
Sep‐16
Nov‐16
Jan‐17
Mar‐17
May‐17
60.0
Source: Bloomberg, PL Research Wheat prices have cooled off after a sharp
Wheat: Q1FY18 prices up 2.7% YoY and down 12.2% QoQ spike to Rs2,363/Qntl in Nov’16; we believe 2,600 Rs1,700/Qntl should be the new floor in the
2,400 near term
2,363 (Rs / Quintal)
2,200 2,000 1,705 1,629 1,800 1,745 1,600 1,400 1,513 1,200 Sep‐11
Nov‐11
Jan‐12
Mar‐12
May‐12
Jul‐12
Sep‐12
Nov‐12
Jan‐13
Mar‐13
May‐13
Jul‐13
Sep‐13
Nov‐13
Jan‐14
Mar‐14
May‐14
Jul‐14
Sep‐14
Nov‐14
Jan‐15
Mar‐15
May‐15
Jul‐15
Sep‐15
Nov‐15
Jan‐16
Mar‐16
May‐16
Jul‐16
Sep‐16
Nov‐16
Jan‐17
Mar‐17
May‐17
1,000 Source: Bloomberg, PL Research Price have corrected by 20% from highs of PFAD: Average Q1FY18 prices up 3.1% YoY and down 13.7% QoQ Rs48000/MT
YoY
80.0
QoQ
69.7
60.0 54.3
37.9
(%)
40.0
20.0
30.3
28.7
6.7
4.6
3.8
0.0
‐4.4
‐13.2
Jun‐17
Mar‐17
Dec‐16
Sep‐16
Jun‐16
Mar‐16
‐27.8 ‐28.9
Dec‐15
Jun‐15
Mar‐15
Sep‐14
Jun‐14
Mar‐14
‐40.0
Dec‐14
‐18.1 ‐18.9 ‐21.9
Sep‐15
‐20.0
Source: Bloomberg, PL Research July 11, 2017 78
Apr‐Jun 2017 Earnings Preview
Sugar: Q1FY18 sugar prices are up 6.7% YoY and down 0.8% QoQ 3,945 3,795 3,545 3,248 3,165 3,345 May‐17
Feb‐17
Nov‐16
Aug‐16
May‐16
Feb‐16
Nov‐15
Aug‐15
May‐15
Feb‐15
Nov‐14
Aug‐14
May‐14
Feb‐14
Nov‐13
May‐13
Aug‐13
2,885 Nov‐12
looks unlikely
(Rs / Quintal)
Rs3800‐Rs3900/MT; expect prices to remain range bound, significant correction
4,200 4,000 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 2,200 Feb‐13
Sugar prices are sustaining higher levels of
Source: Bloomberg, PL Research Copra: prices are up 3.8% QoQ and 57.4% YoY 10,500
9365
9,500
8,500
8410
8025
7,500
6,500
5920
5,500
5165
4,500
Jun‐17
May‐17
Apr‐17
Feb‐17
Mar‐17
Jan‐17
Dec‐16
Nov‐16
Oct‐16
Sep‐16
Aug‐16
Jul‐16
Jun‐16
May‐16
Apr‐16
Mar‐16
Feb‐16
Jan‐16
Dec‐15
3,500
Source: Bloomberg, PL Research Tio2: Average Q1FY18 prices are up 15.3% QoQ and 26% YoY TiO2 prices have moved up sharply on the
back of increase demand and supply
20.0
disruptions 15.0
TiO2 ‐ YoY Price Change%
14.9
10.7
10.0
5.0
0.9
0.4
0.0
‐5.0
‐5.5
Nov‐13
Jan‐14
Mar‐14
May‐14
Jul‐14
Mar‐15
May‐15
Jul‐15
Sep‐15
Nov‐15
Jan‐16
Mar‐16
May‐16
Jul‐16
Sep‐16
Nov‐16
Jan‐17
Mar‐17
Sep‐14
‐13.7
‐14.0
‐20.0
Nov‐14
‐15.0
Jan‐15
‐10.0
Source: Bloomberg, PL Research July 11, 2017 79
Apr‐Jun 2017 Earnings Preview
1521
1453
1160
944
884
861
Jun‐17
Apr‐17
Feb‐17
Dec‐16
Sep‐16
Jul‐16
May‐16
Mar‐16
Dec‐15
Oct‐15
Aug‐15
Jun‐15
Apr‐15
Jan‐15
Nov‐14
697
Sep‐14
1650
1550
1450
1350
1250
1150
1050
950
850
750
650
Jul‐14
USD/MT
VAM: down 1.4% YoY and up 2.5% QoQ Source: Bloomberg, PL Research Gold price is trading in the range of Rs28‐
Gold: prices (RS) are down 0.5% QoQ and 2.4% YoY 31.5K during the last one year
33000
31000
INR/10gm
29000
31529
30823
28168
28531
27000
27305
25000
23000
24562
24994
21000
19000
Source: Company Data, PL Research July 11, 2017 80
Apr‐Jun 2017 Earnings Preview
Volume growth expected to remain benign in Q1 as GST uncertainty casts shadow Volume growth (%) 1QFY16 2QFY16 3QFY16
4QFY16
1QFY17
2QFY17 3QFY17 4QFY17
1QFY18E
Asian Paints 11.0 8.0 15.0
13.0
11.0
12.0 3.0 11.0
8.0
Britannia 12.0 11.0 11.0
10.0
8.3
7.0 2.0 2.0
2.5
Colgate 3.0 3.0 1.0
4.0
6.0
4.0 (12.0) (3.0)
2.0
Dabur India 8.1 5.0 ‐2.5
7.0
4.1
4.5 (5.0) 2.4
0.0
GSK Consumer 3.0 ‐1.5 0.0
0.0
(2.5)
(3.0) (17.0) (1.0)
(3.0)
ITC (Cigarettes) ‐17.0 ‐14.5 ‐4.0
0.5
3.0
3.5 0.0 0.0
2.0
HUVR 6.0 7.0 6.0
4.0
4.0
(1.0) (4.0) 4.0
1.0
12.5 11.5 15.5
12.0
9.0
10.0 9.5 14.9
7.0
7.5 11.0 4.0
6.0
7.0
(6.0) (1.0) 15.0
5.0
Saffola 3.5 4.0 17.0
13.0
11.0
8.0 6.0 6.0
5.0
Hair Oil 13.0 8.0 21.0
11.0
9.0
11.0 (12.0) 10.0
5.0
5.0 3.5 11.5
13.0
12.0
8.5 (0.7) 8.2
8.0
‐10.0 ‐10.0 28.0
15.0
6.0
(32.0) 4.0 37.0
40.0
4.6 3.2 2.0
2.9
(3.2)
4.2 (3.3) (7.5)
0.0
Kansai Nerolac MRCO ‐ Parachute Pidilite (C&B) Titan (Jewellery) Jubilant (SSS) Source: Company Data, PL Research Stock Performance; CLGT, BRIT and TTAN outperform in past 1 month; HMN, SKB and JUBI underperform Absolute
1M
3M
Relative to Sensex
6M
12M
1M
3M
6M
12M
As i a n Pa i nts
(1.9) 6.9
22.5
12.0
(3.3) (0.4) 4.6
(4.9)
Bri ta nni a Indus tri es
1.2
8.7
28.9
32.0
(0.2) 1.5
11.0
15.1
0.2
4.6
(1.3)
Col ga te Pa l mol i ve
1.6
7.6
22.5
15.6
Da bur Indi a
7.9
6.1
9.7
(2.6) 6.5
0.3
Ema mi
(6.9) 1.4
1.1
(4.3) (8.4) (5.8) (16.8) (21.2)
Gl a xoSmi thKl i ne Cons umer Hea l thca re
1.5
5.8
7.0
(10.5) 0.1
Hi ndus ta n Uni l ever
0.1
18.6
32.1
19.2
(1.3) 11.3
14.2
2.3
ITC 8.8
21.8
33.9
35.6
7.4
14.6
16.0
18.6
Jubi l a nt FoodWorks
14.9
8.1
33.2
(6.0) 13.5
0.9
15.3
(22.9)
(1.2) (8.2) (19.5)
(1.4) (10.9) (27.4)
Ka ns a i Nerol a c Pa i nts
5.4
14.6
31.2
39.8
4.0
7.4
13.3
22.9
Ma ri co 2.0
8.1
24.0
22.7
0.6
0.9
6.1
5.8
Nes tl e Indi a
2.1
3.0
15.9
6.1
0.7
(4.2) (2.0) (10.9)
Pi di l i te Indus tri es
2.4
16.9
30.3
12.7
1.0
9.7
12.4
(4.2)
Ti ta n Indus tri es
2.3
10.6
48.4
33.9
0.8
3.4
30.5
17.0
Source: Bloomberg, PL Research July 11, 2017 81
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
As i a n Pa i nts
Bri ta nni a Indus tri es
Col ga te Pa l mol i ve
Da bur Indi a
Ema mi
Gl a xoSmi thKl i ne Cons umer Hea l thca re
Hi ndus ta n Uni l ever
ITC Jubi l a nt FoodWorks
Ka ns a i Nerol a c Pa i nts
Q1FY18E
July 11, 2017 Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
40,864
36,374
12.3
39,525
3.4
200,790
170,848
17.5
EBITDA
8,700
8,203
6.1
7,119
22.2
34,407
30,214
13.9
Margins (%)
21.3
22.6
328 bps 17.1
17.7
(55)bps
PAT
5,731
5,225
9.7
4,796
19.5
22,404
19,178
16.8
Sa l es
21,278
19,849
7.2
20,893
1.8
96,899
84,144
15.2
EBITDA
3,035
2,985
1.7
2,861
6.1
14,360
12,042
19.3
Margins (%)
14.3
15.0
57 bps 14.8
14.3
51 bps
PAT
2,163
2,104
2.8
1,977
9.4
10,079
8,437
19.5
Sa l es
12,414
11,491
8.0
11,767
5.5
44,238
39,818
11.1
EBITDA
2,367
2,113
12.0
2,443
(3.1) 10,525
9,449
11.4
Margins (%)
19.1
18.4
68 bps 20.8
(169)bps 23.8
23.7
6 bps
PAT
1,417
1,257
12.7
1,426
(0.6) 6,361
5,774
10.2
Sa l es
18,320
19,284
(5.0) 19,147
(4.3) 90,614
77,014
17.7
EBITDA
3,334
3,488
(4.4) 4,176
(20.1) 17,450
15,089
15.6
Margins (%)
18.2
18.1
11 bps 21.8
(361)bps 19.3
19.6
(33)bps
PAT
2,861
2,928
(2.3) 3,331
(14.1) 14,891
12,769
16.6
Sa l es
5,799
6,444
(10.0) 5,777
0.4
27,681
25,326
9.3
EBITDA
1,334
1,473
(9.4) 1,781
(25.1) 8,182
7,591
7.8
Margins (%)
23.0
22.9
15 bps 30.8
(783)bps 29.6
30.0
(41)bps
PAT
494
567
(12.8) 833
(40.7) 6,123
5,899
3.8
Sa l es
9,540
9,439
1.1
11,019
(13.4) 46,522
44,211
5.2
EBITDA
2,011
2,035
(1.2) 2,171
(7.4) 8,543
8,335
2.5
Margins (%)
21.1
21.6
(48)bps 19.7
138 bps 18.4
18.9
(49)bps
PAT
1,647
1,606
2.6
1,759
(6.3) 6,963
6,566
6.1
Sa l es
84,803
81,282
4.3
82,130
3.3
354,266
318,898
11.1
EBITDA
17,120
16,359
4.7
16,510
3.7
68,938
60,492
14.0
Margins (%)
20.2
20.1
9 bps 19.5
19.0
49 bps
PAT
11,968
11,277
6.1
11,840
1.1
49,134
42,775
14.9
Sa l es
111,143
100,540
10.5
111,255
(0.1) 450,082
400,887
12.3
EBITDA
39,218
35,262
11.2
38,754
1.2
173,004
145,780
18.7
Margins (%)
35.3
35.1
45 bps 38.4
36.4
207 bps
PAT
26,389
23,847
10.7
26,695
(1.1) 116,490
102,009
14.2
Sa l es
6,270
6,089
3.0
6,128
2.3
28,066
25,469
10.2
EBITDA
614
577
6.4
605
1.5
2,757
2,476
11.4
Margins (%)
9.8
9.5
32 bps 9.9
(8)bps 9.8
9.7
10 bps
PAT
164
190
(13.8) 149
10.1
903
845
6.9
Sa l es
11,360
10,471
8.5
9,415
20.7
45,625
39,974
14.1
EBITDA
2,022
1,868
8.3
1,641
23.2
8,269
7,298
13.3
Margins (%)
17.8
17.8
37 bps 18.1
18.3
(13)bps
PAT
1,355
1,265
5,006
8.6 Source: Company Data, PL Research Q1FY17 YoY gr. (%)
Sa l es
(126)bps 18.0
(78)bps 13.7
6 bps 20.1
21 bps 34.8
(4)bps 17.4
7.1
1,162
16.6
5,435
82
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
Ma ri co Nes tl e Indi a
Pi di l i te Indus tri es
Ti ta n Indus tri es
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
Sa l es
17,893
17,543
2.0
13,222
35.3
67,843
59,359
14.3
EBITDA
3,668
3,740
(1.9) 2,595
41.4
12,711
11,588
9.7
88 bps 18.7
Margins (%)
20.5
21.3
(82)bps 19.6
19.5
(79)bps
PAT
2,633
2,679
(1.7) 1,709
54.0
8,935
8,110
10.2
Sa l es
23,626
22,717
4.0
25,919
(8.8) 49,545
45,742
8.3
EBITDA
4,489
4,513
(0.5) 5,272
(14.9) 9,761
9,766
(0.0)
Margins (%)
19.0
19.9
(87)bps 20.3
(134)bps 19.7
21.3
(165)bps
PAT
2,763
2,853
(3.2) 3,166
(12.7) 5,928
5,910
0.3
Sa l es
14,446
13,702
5.4
11,325
27.6
58,668
52,987
10.7
EBITDA
3,988
3,867
3.1
2,541
56.9
13,270
12,249
8.3
Margins (%)
27.6
28.2
516 bps 22.6
23.1
(50)bps
PAT
2,760
2,724
1.3
1,654
66.9
9,027
8,681
4.0
Sa l es
40,303
27,988
44.0
34,297
17.5
150,466
126,145
19.3
EBITDA
3,788
2,922
29.7
2,721
39.2
14,683
11,954
22.8
Margins (%)
9.4
10.4
PAT
2,652
2,236
(62)bps 22.4
(104)bps 7.9
18.6
2,029
147 bps 9.8
30.7
10,136
9.5
8,582
28 bps
18.1 Source: Company Data, PL Research Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) Apr‐Jun'17
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
2017E
2018E
2019E
Net Sales
1,559,825
1,764,929
2,017,087
Net Sa l es
418,060
383,212
9.1
401,818
4.0
Growth (%)
6.0
13.1
14.3
EBITDA
95,689
89,404
7.0
91,190
4.9
EBITDA
354,858
407,545
476,588
Margin (%)
22.9
23.3
(44)bps
22.7
19 bps
Margin (%)
22.7
23.1
23.6
PAT (Excl . Ex Items )
64,997
60,757
7.0
62,525
4.0
PAT
246,557
279,656
329,886
Growth (%)
9.0
13.4
18.0
46.9
41.4
35.1
PE (x)
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. July 11, 2017 83
Apr‐Jun 2017 Earnings Preview
Asian Paints Ra ti ng
Accumulate
Pri ce (Rs )
1,131
Ta rget Pri ce (Rs )
APNT is expected to post sales growth of 12.3% on a 8% volume growth. EBITDA margin is expected to decline by 126bps on 260bps gross margin decline. APNT has taken 3% price increase from May 2017 after a 2% price increase in March. GST is expected to impact stocking at dealer levels impacting volumes in Q1. 1,171
M/Ca p (Rs bn)
1,084.6
Sha res o/s (m)
959.2
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
Net Sa l es
EBITDA
FY19E
170,848
200,790
235,860
30,214
34,407
41,554
Margin (%)
PAT
FY18E
17.7
17.1
17.6
19,178
22,404
27,068
EPS (Rs )
Q1
FY18E
40,864
Q1
FY17
36,374
8,700
8,203
6.1
7,119
34,407
30,214
13.9
21.3
22.6
(126)bps
18.0
17.1
17.7
(55)bps
Reported PAT
5,731
5,225
9.7
4,796
22,404
19,255
16.4
PAT (Excl. Ex Items)
5,731
5,225
9.7
4,796
22,404
19,178
16.8
Y/e March
Net Sales
EBITDA
Margin (%)
YoY gr. (%)
12.3
Q4
12M
12M
FY17
FY18E
FY17
39,525 200,790 170,848
YoY gr. (%)
17.5
20.0
23.4
28.2
6.8
16.8
20.8
RoE (%)
32.0
32.6
34.0
PE (x)
56.6
48.4
40.1
Decoratives Volume Growth %
P / BV (x)
17.0
14.8
12.7
Gross Margins %
39.5
42.1
(259)bps
39.2
39.3
40.3
(100)bps
EV / E (x)
35.3
31.1
25.6
Tio2 Pri ce Index
270
215
25.6
235
223
213
3.8
Growth (%)
Operating Metrics
8.0 11.0 (300)bps
11.0 13.0 8.0 500 bps
Britannia Industries We estimate 7.2% sales growth on a 2.5% volumes. We estimate 200bps decline in gross margins YoY due to YoY increase in Wheat, Palm oil, SMP and Sugar prices. EBITDA is expected to increase by 1.7% on 78bps margin decline majorly due to cost savings . We estimate 2.8% increase in Adj.PAT to Rs2.16bn. Ra ti ng
Buy
Pri ce (Rs )
3,712
Ta rget Pri ce (Rs )
4,255
M/Ca p (Rs bn)
445.5
Sha res o/s (m)
120.0
Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sa l es
84,144
96,899
112,779
EBITDA
12,042
14,360
17,710
Margin (%)
PAT
EPS (Rs )
Growth (%)
14.3
14.8
15.7
8,437
10,079
12,198
70.3
84.0
101.6
11.1
19.5
21.0
RoE (%)
43.3
40.6
39.1
PE (x)
52.8
44.2
36.5
P / BV (x)
20.3
16.1
12.8
EV / E (x)
35.6
29.5
23.5
July 11, 2017 Quarterly Table (Rs m) ‐ Standalone Y/e March
Net Sales
Q1
FY18E
Q1
FY17
21,278
19,849
3,035
14.3
Reported PAT
PAT (Excl. Ex Items)
EBITDA
Margin (%)
YoY gr. (%)
Q4
FY17
12M
FY18E
96,899
12M
FY17
84,144
YoY gr. (%)
7.2
20,893
15.2
2,985
1.7
2,861
14,360
12,042
19.3
15.0
(78)bps
13.7
14.8
14.3
51 bps
2,163
2,103
2.8
1,977
10,079
8,439
19.4
2,163
2,104
2.8
1,977
10,079
8,437
19.5
37.8
39.8
(200)bps
37.8
33.7
38.2
(456)bps
Operating Metrics
Gross Margin %
84
Apr‐Jun 2017 Earnings Preview
Colgate Palmolive Ra ti ng
Reduce
Pri ce (Rs )
1,093
Ta rget Pri ce (Rs )
We estimate 8% sales growth on 2% volume growth. We estimate 12% increase in EBITDA on 68bps margin increase. Adj. PAT is estimated to increase by 12.7% to Rs1.4bn. Toothpaste market share and volume growth would be the key factors to watch out for in Q1 results, given significant reduction in GST rates on oral care. 850
M/Ca p (Rs bn)
297.3
Sha res o/s (m)
272.0
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY18E
FY19E
Quarterly Table (Rs m) Y/e March
Q1
FY18E
12,414
Q1
FY17
11,491
YoY gr. (%)
8.0
2,367
2,113
12.0
2,443
10,525
9,449
11.4
19.1
18.4
68 bps
20.8
23.8
23.7
6 bps
39,818
44,238
49,731
9,449
10,525
11,757
23.7
23.8
23.6
5,774
6,361
7,206
21.2
23.4
26.5
1.9
10.2
13.3
RoE (%)
50.8
46.6
45.7
Operating Metrics
PE (x)
51.5
46.7
41.3
Volume Growth %
P / BV (x)
23.7
20.1
17.8
Tax rate %
EV / E (x)
31.0
27.7
24.6
Gross margin %
55.3
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
Net Sales
EBITDA
Margin (%)
Q4
12M
12M
FY17
FY18E
FY17
11,767 44,238 39,818
YoY gr. (%)
11.1
Reported PAT
1,417
1,252
13.2
1,403
6,361
5,723
11.2
PAT (Excl. Ex Items)
1,417
1,257
12.7
1,426
6,361
5,774
10.2
2.0
6.0
(400)bps
(3.0)
5.0
0.0
500 bps
34.0
33.7
27 bps
34.7
34.0
34.0
0 bps
54.9
40 bps
55.2
62.2
62.9
(73)bps
Dabur India We estimate flat volumes for Dabur. We estimate 10bps EBITDA margin expansion enabled by lower overheads. Adj. PAT is expected to decline by 2.3% to Rs2.86bn. We expect pressure on volumes mainly due to de‐stocking impact as 40% of sales is from Wholesale. Currency depreciation in Egypt and macro challenges in Middle East will continue to impact demand in IBD business. Ra ti ng
Accumulate
Pri ce (Rs )
304
Ta rget Pri ce (Rs )
318
M/Ca p (Rs bn)
538.0
Sha res o/s (m)
1,769.1
Key Figures (Rs m) Y/e March
FY18E
FY19E
Q1
FY18E
18,320
Q1
FY17
19,284
YoY gr. (%)
(5.0)
EBITDA
3,334
3,488
(4.4)
4,176
17,450
15,089
15.6
Margin (%)
18.2
18.1
11 bps
21.8
19.3 19.6
(33)bps
Reported PAT
2,861
3,130
(8.6)
3,076
14,891
11,267
32.2
PAT (Excl. Ex Items)
2,861
2,928
(2.3)
3,331
14,891
12,769
16.6
Net Sa l es
77,014
90,614
102,795
Y/e March
EBITDA
15,089
17,450
20,110
Net Sales
19.6
19.3
19.6
12,769
14,891
17,093
7.2
8.4
9.6
1.8
16.1
14.5
RoE (%)
28.5
26.7
26.1
PE (x)
41.9
36.1
31.6
P / BV (x)
11.1
9.5
8.3
EV / E (x)
36.2
30.8
26.7
Margin (%)
PAT
EPS (Rs )
Growth (%)
Quarterly Table (Rs m) FY17
July 11, 2017 Q4
12M
12M
FY17
FY18E
FY17
19,147 90,614 77,014
YoY gr. (%)
17.7
Operating Metrics
Volume Growth
Gross Margin
0.0
4.1 (410)bps
47.3
51.4 (407)bps
2.4 0.9 4.4 (350)bps
49.0 53.3 50.1
324 bps
85
Apr‐Jun 2017 Earnings Preview
Emami Ra ti ng
Reduce
Pri ce (Rs )
1,050
Ta rget Pri ce (Rs )
We estimate 10% sales decline as high exposure to wholesale channel will impact sales. We estimate 50bps decline in gross margins and 15bps expansion in EBITDA margins on cut in ad spends and promotions ahead of GST. Watch out for sales commentary post GST. 998
M/Ca p (Rs bn)
238.4
Sha res o/s (m)
227.0
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY18E
FY19E
25,326
27,681
30,936
7,591
8,182
9,031
30.0
29.6
29.2
Y/e March
5,899
6,123
7,098
EBITDA
Margin (%)
PAT
EPS (Rs )
Quarterly Table (Rs m) Net Sales
Q1
FY18E
5,799
Q1
FY17
6,444
YoY gr. (%)
(10.0)
Q4
12M
12M
FY17
FY18E
FY17
5,777 27,681 25,326
YoY gr. (%)
9.3
EBITDA
1,334
1,473
(9.4)
1,781
8,182
7,591
7.8
26.0
27.0
31.3
8.8
3.8
15.9
23.0
22.9
15 bps
30.8
29.6
30.0
(41)bps
RoE (%)
36.9
32.4
33.6
Reported PAT
494
449
10.0
833
6,123
6,294
(2.7)
PE (x)
40.4
38.9
33.6
PAT (Excl. Ex Items)
494
567
(12.8)
833
6,123
5,899
3.8
P / BV (x)
13.3
12.0
10.7
Operating Metrics
EV / E (x)
31.8
28.8
25.5
Gross Margin %
64.0
64.5
(51)bps
62.2
65.6
65.5
6 bps
Growth (%)
Margin (%)
GSK Consumer We estimate 1.1% increase in sales as volumes are expected to decline by 3%. We estimate 1.2% decline in EBITDA and 48bps decline in margins on firm prices of SMP and Wheat. We estimate 2.6% increase in Adj. PAT at Rs1.65bn. Management commentary on volume growth and gross margins would be the key. Ra ti ng
Accumulate
Pri ce (Rs )
5,470
Ta rget Pri ce (Rs )
5,617
M/Ca p (Rs bn)
230.1
Sha res o/s (m)
42.1
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
FY19E
44,211
46,522
51,579
8,335
8,543
9,767
18.9
18.4
18.9
6,566
6,963
7,874
156.1
165.6
187.2
(4.5) 6.1
13.1
Quarterly Table (Rs m) Y/e March
Q1
FY18E
Net Sales
9,540
9,439
1.1
11,019
46,522
44,211
5.2
2,011
2,035
(1.2)
2,171
8,543
8,335
2.5
RoE (%)
25.4
24.3
24.8
EBITDA
PE (x)
35.0
33.0
29.2
Margin (%)
P / BV (x)
8.4
7.6
6.9
EV / E (x)
27.5
26.8
23.5
FY17
July 11, 2017 Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
21.1
21.6
(48)bps
19.7
18.4
18.9
(49)bps
Reported PAT
1,647
1,606
2.6
1,732
6,963
6,782
2.7
PAT (Excl. Ex Items)
1,647
1,606
2.6
1,759
6,963
6,566
6.1
86
Apr‐Jun 2017 Earnings Preview
Hindustan Unilever Ra ti ng
BUY
Pri ce (Rs )
1,097
Ta rget Pri ce (Rs )
HUVR is expected to report 4.3% increase in sales on 1.5% increase in volume as destocking has impacted CSD channel. We estimate flat margins and EBITDA at Rs17.1bn; Adj. PAT is expected to increase 6.1% at Rs11.96bn. Pace of GST implementation across distribution chain will hold key to Q2 growth. 1,204
M/Ca p (Rs bn)
2,373.3
Sha res o/s (m)
2,163.9
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY19E
318,898
354,266
400,383
60,492
68,938
82,318
19.0
19.5
20.6
42,775
49,134
59,521
19.8
22.7
27.5
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
Quarterly Table (Rs m) Net Sa les
Q1
FY18E
84,803
Q1
FY17
81,282
EBITDA
17,120
16,359
4.7
Y/e March
Margin (%)
YoY gr. (%)
4.3
Q4
12M
12M
FY17
FY18E
FY17
82,130 354,266 318,898
YoY gr. (%)
11.1
16,510
68,938
60,492
14.0
20.2
20.1
6 bps
20.1
19.5
19.0
49 bps
Reported PAT
11,968
11,739
1.9
11,830
49,134
42,775
14.9
PAT (Excl . Ex Items )
11,968
11,277
6.1
11,840
49,134
42,775
14.9
4.8
14.9
21.1
118.5
134.8
139.7
PE (x)
55.5
48.3
39.9
Operating Metrics
P / BV (x)
67.1
63.2
49.9
Volume Growth %
1.5
4.0
NA
4.0
6.9
(1.5)
839 bps
EV / E (x)
38.3
33.5
27.9
PFAD Price change %
0.0
6.7
NA
30.3
31.5
(21.4)
NA
RoE (%)
ITC We estimate 2% Cigarette volumes growth (flat in Q4). GST rates on cigarettes are neutral because of which no further price hike was required. FMCG sales are expected to grow by 5% with EBIT loss of Rs25m. We expect EBIT growth of 8% in Paper and packaging, Hotels are expected to report Rs161m EBIT during the quarter. Adj. PAT is expected to increase 10.7% at Rs26.38bn. Key factors to watch out for: Volumes and margins trend in Cigarettes and growth in FMCG and Hotels. Ra ti ng
Buy
Pri ce (Rs )
333
Ta rget Pri ce (Rs )
400
M/Ca p (Rs bn)
4,082.6
Sha res o/s (m)
12,250.8
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY18E
FY19E
Net Sa l es
400,887
450,082
512,034
EBITDA
145,780
173,004
202,012
36.4
38.4
39.5
102,009
116,490
137,520
8.4
9.5
11.1
(27.5) 13.4
17.2
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
30.4
32.0
33.3
PE (x)
39.7
35.0
29.9
P / BV (x)
11.8
10.6
9.3
EV / E (x)
27.1
22.6
19.1
FY17
July 11, 2017 Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
111,143
Q1
FY17
100,540
YoY gr. (%)
10.5
Q4
12M
12M
FY17
FY18E
FY17
111,255 450,082 400,887
YoY gr. (%)
12.3
39,218
35,262
11.2
38,754
173,004
145,780
18.7
35.3
35.1
21 bps
34.8
38.4
36.4
207 bps
Reported PAT
26,389
24,482
7.8
28,697
116,490
102,009
14.2
PAT (Excl. Ex Items)
26,389
23,847
10.7
26,695
116,490
102,009
14.2
Cigarette Vol. Gr. (%)
2.0
3.0
(100)bps
0.0
4.2
2.5
172 bps
Cigarette EBIT Gr. (%)
8.5
8.0
42 bps
8.0
16.8
6.6
1,024 bps
FMCG EBIT (Rs m)
(25)
(45)
(44.6)
556
1,423
1,052
35.2
Operating Metrics
87
Apr‐Jun 2017 Earnings Preview
Jubilant Foodworks Ra ti ng
Reduce
Pri ce (Rs )
We estimate 3% sales growth on flat SSS. Gross margins are expected to decline by 130bps on a high RM costs. EBITDA will increase by 6.4% aided by 32bps increase in margins to 9.8%. PAT is expected to decline 13.8% at Rs164m. 1,111
Ta rget Pri ce (Rs )
675
M/Ca p (Rs bn)
73.1
Sha res o/s (m)
65.8
Y/e March
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY18E
FY19E
25,469
28,066
31,131
2,476
2,757
3,236
EBITDA
Quarterly Table (Rs m) Net Sales
EBITDA
Q1
FY18E
6,270
Q1
FY17
6,089
614
577
6.4
32 bps
9.9
9.8
9.7
10 bps
(13.8)
149
903
764
18.3
PAT (Excl. Ex Items)
164
190
(13.8)
149
903
845
6.9
320 bps
(7.5)
(2.0)
(3.0)
10.0 40.0
91.0
(5,100)bps
74.6
75.8
(120)bps
903
1,162
EPS (Rs )
12.8
13.7
17.7
Operating Metrics
28.7
Same Store Sales growth %
0.0 (3.2)
3.0 23.0 PE (x)
11.4
9.5
845
12.7
2,476
190
PAT
10.7
2,757
9.8
10.4
10.7
605
164
9.8
(20.7) 6.9
YoY gr. (%)
10.2
Reported PAT
9.7
RoE (%)
Q4
12M
12M
FY17
FY18E
FY17
6,128 28,066 25,469
Margin (%)
Margin (%)
Growth (%)
YoY gr. (%)
3.0
86.5
80.9
62.9
P / BV (x)
9.0
8.3
7.6
Dominos Store Addition
EV / E (x)
29.1
25.6
21.4
Gross Margin %
75.5
76.8
(2,000)bps
(128)bps
76.9
NA
Kansai Nerolac Paints Kansai Nerolac is expected to post a sales growth of 8.5% on 7% increase in volumes. EBITDA is expected to grow by 8.3% to Rs2bn on flat margins of 17.8%. Adj.PAT is expected to grow by 7.1% to Rs1.35bn. Price increase of 3% was effected from May17 after a price increase in March to combat higher RM costs. Ra ti ng
Buy
Pri ce (Rs )
444
Ta rget Pri ce (Rs )
440
M/Ca p (Rs bn)
239.5
Sha res o/s (m)
538.9
*TP is below CMP. It will be revised post earnings Key Figures (Rs m) Y/e March
Net Sa l es
FY18E
FY19E
45,625
53,750
7,298
8,269
9,811
18.3
18.1
18.3
5,006
5,435
6,411
9.3
10.1
11.9
37.7
8.6
18.0
RoE (%)
20.6
19.8
20.8
PE (x)
47.8
44.1
37.4
P / BV (x)
9.3
8.3
7.3
EV / E (x)
32.8
28.9
24.3
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY17
39,974
July 11, 2017 Quarterly Table (Rs m) Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
11,360
10,471
8.5
9,415
45,625
39,974
14.1
2,022
1,868
8.3
1,641
8,269
7,298
13.3
17.8
17.8
(4)bps
17.4
18.1
18.3
(13)bps
Reported PAT
1,355
1,265
7.1
1,121
5,435
5,006
8.6
PAT (Excl. Ex Items)
1,355
1,265
7.1
1,162
5,435
5,006
8.6
88
Apr‐Jun 2017 Earnings Preview
Marico Ra ti ng
Reduce
Pri ce (Rs )
324
Ta rget Pri ce (Rs )
We estimate 2% sales increase on 5% volume growth in Parachute, Saffola and VAHO (Value added Hair Oil). GST is expected to impact volume recovery. We estimate 1.9% decline in EBITDA, resulting in 82bps margin decline. Adj. PAT is estimated to decline 1.7% to Rs2.6bn. 281
M/Ca p (Rs bn)
417.6
Sha res o/s (m)
1,290.2
Quarterly Table (Rs m) Y/e March
Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sales
Net Sa l es
59,359
67,843
77,176
EBITDA
EBITDA
11,588
12,711
14,401
Margin (%)
19.5
18.7
18.7
8,110
8,935
10,182
6.3
6.9
7.9
10.9
10.2
14.0
RoE (%)
36.7
35.9
PE (x)
51.5
46.7
P / BV (x)
18.0
EV / E (x)
36.1
Margin (%)
PAT
EPS (Rs )
Growth (%)
Q1
FY18E
17,893
Q1
FY17
17,543
YoY gr. (%)
2.0
3,668
3,740
(1.9)
Q4
12M
12M
FY17
FY18E
FY17
13,222 67,843 59,359
YoY gr. (%)
14.3
2,595
12,711
11,588
9.7
20.5
21.3
(82)bps
19.6
18.7
19.5
(79)bps
Reported PAT
2,633
2,679
(1.7)
1,656
8,935
7,929
12.7
PAT (Excl. Ex Items)
2,633
2,679
(1.7)
1,709
8,935
8,110
10.2
Parachute Vol. Gr. (%
5.0
7.0
(29)bps
15.0
0.5
7.2
(670)bps
35.9
Saffola Vol. Gr. (%)
5.0
11.0
(55)bps
6.0
7.8
9.5
(175)bps
41.0
Hair Oil Vol. Gr. (%)
5.0
9.0
(44)bps
10.0
1.5
13.5
(1,200)bps
15.7
13.8
Domes tic Vol. Gr. (%)
4.0
8.0
(50)bps
10.0
1.9
7.6
(575)bps
32.9
29.0
Gros s Margin %
50.5
52.0
(3)bps
51.9
50.0
52.0
(202)bps
Operating Metrics
Nestle India We estimate 4% sales growth as pressure on core categories continues. We expect 100bps YoY decline in gross margins due to change in sales mix and rising prices of SMP (Skimmed Milk Powder), Wheat and Sugar. EBITDA is expected to remain flat on 87bps decline in margins. Adj. PAT is expected to decline by 3.2% at Rs2.76bn. Ra ti ng
Reduce
Pri ce (Rs )
6,809
Ta rget Pri ce (Rs )
5,639
M/Ca p (Rs bn)
657.2
Sha res o/s (m)
96.5
Key Figures (Rs m) Y/e Dec
CY17E
CY18E
Net Sa l es
94,746
103,168
115,351
EBITDA
20,301
20,446
22,574
21.4
19.8
19.6
11,924
12,773
14,549
123.7
132.3
150.7
19.7
7.0
13.9
RoE (%)
40.9
40.3
41.3
PE (x)
55.1
51.4
45.2
P / BV (x)
21.8
19.8
17.7
EV / E (x)
32.4
32.1
29.1
Margin (%)
PAT
EPS (Rs )
Growth (%)
CY16
July 11, 2017 Quarterly Table (Rs m) Q2
CY17E
23,626
Q2
CY16
22,717
4,489
4,513
(0.5)
5,272
9,761
9,766
(0.0)
19.0
19.9
(87)bps
20.3
19.7
21.3
(165)bps
Reported PAT
2,763
2,308
19.7
3,068
5,830
4,898
19.0
PAT (Excl. Ex Items)
2,763
2,853
(3.2)
3,166
5,928
5,910
0.3
Y/e Dec
Net Sales
EBITDA
Margin (%)
YoY gr. (%)
4.0
Q1
H1
H1
CY17
CY17E
CY16
25,919 49,545 45,742
YoY gr. (%)
8.3
89
Apr‐Jun 2017 Earnings Preview
Pidilite Industries Ra ti ng
Accumulate
Pri ce (Rs )
822
Ta rget Pri ce (Rs )
We estimate 5.4% sales growth on 8% increase in volumes. EBITDA is expected to increase by 3.1% on 62bps decline in margins. Adj. PAT is expected to increase 1.3% at Rs2.76bn. Volume trend in Consumer and Bazaar products and gross margins will be the key factors to watch out for. 755
M/Ca p (Rs bn)
421.5
Sha res o/s (m)
512.7
*TP is below CMP. It will be revised post earnings Key Figures (Rs m) Y/e March
FY17
FY18E
Net Sa l es
52,987
58,668
67,154
EBITDA
12,249
13,270
14,550
23.1
22.6
21.7
8,681
9,027
9,953
16.9
17.6
19.4
18.9
4.0
10.3
Margin (%)
PAT
EPS (Rs )
Growth (%)
Quarterly Table (Rs m) Q1
FY18E
14,446
Q1
FY17
13,702
3,988
3,867
3.1
2,541
13,270
12,249
8.3
27.6
28.2
(62)bps
22.4
22.6
23.1
(50)bps
Reported PAT
2,760
2,723
1.4
717
9,027
7,718
17.0
2,760
2,724
1.3
1,654
9,027
8,681
4.0
52.0
53.5
(158)bps
53.8
49.1
51.8
(267)bps
8.0
9.0
(100)bps
8.2
5.2
8.3
(310)bps
Y/e March
Net Sa les
EBITDA
Margin (%)
RoE (%)
28.2
24.9
23.7
PAT (Excl . Ex Items )
PE (x)
48.6
46.7
42.4
Operating Metrics
P / BV (x)
12.6
10.8
9.4
EV / E (x)
33.4
30.5
27.5
Gross Margin %
C&B Volume Growth%
YoY gr. (%)
5.4
Q4
12M
12M
FY17
FY18E
FY17
11,325 58,668 52,987
YoY gr. (%)
10.7
Titan Industries We estimate TTAN to post 44% increase in sales to Rs40.3bn, EBITDA is expected to increase 29.7% to Rs3.78bn and Adj.PAT to increase 18.6% to Rs2.65bn. Jewellery should report sales growth of 55% and EBIT growth of 51.7% on 2.5% lower gold prices. Watch business is expected to post 1% sales growth and EBIT of Rs454m. Ra ti ng
Reduce
Pri ce (Rs )
537
Ta rget Pri ce (Rs )
430
M/Ca p (Rs bn)
476.6
Sha res o/s (m)
887.8
Quarterly Table (Rs m) Y/e March
Net Sa les
Key Figures (Rs m) EBITDA
Y/e March
Net Sa l es
FY17
FY18E
FY19E
126,145
150,466
176,430
11,954
14,683
17,758
9.5
9.8
10.1
8,582
10,136
12,049
9.7
11.4
13.6
23.0
18.1
18.9
RoE (%)
22.9
23.5
23.9
PE (x)
55.5
47.0
39.6
P / BV (x)
12.0
10.2
8.8
EV / E (x)
39.2
32.0
26.2
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY19E
July 11, 2017 Margin (%)
Q1
FY18E
40,303
Q1
FY17
27,988
YoY gr. (%)
44.0
3,788
2,922
29.7
Q4
12M
12M
FY17
FY18E
FY17
34,297 150,466 126,145
YoY gr. (%)
19.3
2,721
14,683
11,954
22.8
9.4
10.4
(104)bps
7.9
9.8
9.5
28 bps
Reported PAT
2,652
615
331.2
1,264
10,136
7,773
30.4
PAT (Excl . Ex Items )
2,652
2,236
18.6
2,029
10,136
8,582
18.1
Wa tch s al es Growth
1.0
3.0
(200)bps
10.8
9.0
2.0
696 bps
Wa tch EBIT Growth %
(35.2)
48.0
NA
56.7
24.0
(12.7)
NA
(503)bps
Operating Metrics
Wa tch Ma rgi ns
9.0
14.0
2.4
10.0
8.8
121 bps
Jewelry Sal es Growth
55.0
3.7
5,125 bps
55.0
24.9
17.6
732 bps
Jewell ery EBIT Growt
51.7
19.9
3,184 bps
35.9
23.8
31.6
(782)bps
9.9
10.1
(22)bps
9.9
10.4
10.5
(9)bps
(2.5)
4.0
(650)bps
4.3
5.0
12.0
(700)bps
Jewelry Ma rgi ns
Gol d Pri ce Change %
90
Apr‐Jun 2017 Earnings Preview
Madhu Babu [email protected] +91‐22‐66322300 Top picks Infosys HCL Technologies Persistent Systems Hexaware Technologies Information Technology We expect Tier 1 IT vendors to show moderate growth of (1.2)‐3.2% cc QoQ revenue growth in Q1FY18. TCS/Infosys are likely to lead delivering organic constant currency growth of 2.7/2.7%, respectively for Q1FY18. HCL Tech is likely to benefit from full impact of Geometric acquisition and hence is likely to grow by 3.2% in constant currency (1.6% organic growth and rest owing to additional two months impact of Geometric). Cross‐currency would be a tailwind of 30‐80bps for the quarter and hence, positively aiding reported USD revenues. Hence, reported USD revenues would grow by (0.5)‐4% QoQ for Tier‐I IT vendors. EBITDA margins would see a decline sequentially owing to Rupee appreciation (~3% QoQ) and headwinds from wage hikes for select vendors. Sector has de‐rated significantly over the past one year led by slower growth. TCS/Infosys are trading at 16.5/14.3x one year forward earnings (v/s 18.5/18.6x traded one year ago). Infosys and HCL Tech continue to be the preferred large cap picks. Growth challenges persist: Recent commentary from the management suggest that acceleration in BFSI is not materialising as per their initial expectations. Apart from this, Retail vertical continues to be in pain led by challenges in the industry owing to disruption from e‐Commerce players. We note that major US retailer stocks which include JC Penny, Target and Sears have significant erosion in value over last two years. Hence, traditional retail will continue to remain a pain point for vertical for the IT sector in FY18 as well. Owing to uncertainty around ObamaCare, Healthcare vertical has also seen some slowdown in spending and this was evident from Accenture’s commentary which cited slower decision‐making in North American Healthcare. Back home, Nasscom has recently guided that FY18 Industry USD revenue growth would be ~7‐9%. We believe guidance of Tier 1 IT vendors (Infosys, HCL Tech) imply FY18 organic USD revenue growth of ~6.5‐8% for FY18E. Margins likely to drop modestly on a sequential basis: Average rate (USD v/s INR) for Q1FY18 was at 64.5v/s 66.5 for Q4FY17. This represents a 3% Rupee appreciation for the quarter and pose as margin headwind. Apart from Rupee appreciation, visa expenses and wage hikes (given by select vendors) would be additional headwinds for margins. Select companies have deferred wage hikes (Infosys/Tech M) and hence, attrition metrics of these companies would be keenly watched. We believe that vendors would continue to focus on aggressive cost‐cutting measures in FY18 to counter headwinds from appreciating Rupee. Key metrics to watch: Net addition trends would be keenly watched as most vendors are focusing on automation and improving utilisation rates. TCV wins on the demand front and momentum in Digital business are other important metric to watch (TCS/Wipro disclose proportion of revenues from Digital separately). View: Indian IT stocks is trading at cheap valuations which lead to favourable risk return. Recent slew of buybacks from vendors like TCS/HCL Tech are a positive sign. We expect Wipro to announce a tender buyback in July which could be the second round of buyback. Infosys, HCL Tech are preferred Tier 1 Picks. Persistent Systems, July 11, 2017 91
Apr‐Jun 2017 Earnings Preview
Hexaware and NIIT Tech are preferred midcap picks. However, all these three midcaps have rallied substantially over the past three months. Consolidated USD revenues of Tier‐1 IT companies‐ HCL Tech expected to outperform peers for the quarter US$ m 2QFY15 3QFY15 4QFY15 1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17 3QFY17
Infosys 2201 2218 2159 2256
2392
2407
2446
2501
2587 2551
2569
2651
3.2 0.8 (2.7) 4.5
6
0.6
1.6
2.2
3.5 (1.4)
0.7
3.2
3929 3931 3900 4036
4156
4145
4207
4362
4374 4387
4452
4612
6.4 0.1 (0.8) 3.5
3
(0.3)
1.5
3.7
0.3 0.3
1.5
3.5
1771 1795 1774 1794
1832
1838
1882
1931
1916 1903
1955
1945
Growth (%) TCS Growth (%) Wipro Growth (%) HCL Tech 4QFY17 1QFY18E
1.8 1.4 (1.2) 1.1
2.1
0.3
2.4
2.6
(0.8) (0.7)
2.7
(0.5)
1433 1491 1491 1538
1545
1566
1587
1691
1722 1756
1817
1890
1.8 4 0 3.2
0.5
1.4
1.4
6.6
1.9 1.9
4.1
4.0
Growth (%) Source: Company Data, PL Research, Wipro and HCL Tech would have impact of acquisitions for the quarter Average Exchange rates – Rupee appreciates sharply in the quarter 3QFY15 4QFY15 1QFY16 2QFY16
3QFY16
4QFY16
1QFY17
2QFY17 3QFY17 4QFY17
1QFY18
Euro/ US$ (Average) 1.24 1.12 1.1 1.11
1.09
1.1
1.12
1.11 1.08 1.07
1.099
% Change (6.0) (10.0) (1.8) 0.9
(1.8)
0.9
1.8
(0.9) (3.2) (1.2)
2.7
GBP/US$ (Average) 1.58 1.51 1.53 1.55
1.51
1.43
1.43
1.31 1.24 1.24
1.278
% Change (5.3) (4.4) 1.3 1.3
(2.6)
(5.3)
0.7
(8.4) (5.3) ‐
3.1
AUD/US$ (Average) 0.85 0.78 0.77 0.72
0.72
0.72
0.74
0.76 0.75 0.76
0.75
% Change (7.6) (8.2) (1.3) (6.5)
‐
‐
2.7
2.7 (1.2) 1.2
(1.3)
US$/INR (Average) 62 62.3 63.5 64.9
65.9
67.6
66.93
66.95 67.4 67.01
64.5
% Change 2.3 0.4 2.0 3.1
1.5
2.4
(1.0)
‐ 0.7 (0.6)
(3.7)
Source: Company Data, PL Research Constant Currency QoQ growth‐ HCL Tech expected to outperform peers amongst Tier‐1 IT companies 3QFY15 4QFY15 1QFY16 2QFY16
3QFY16
4QFY16
1QFY17
2QFY17 3QFY17 4QFY17
1QFY18E
Infosys 2.6 ‐0.4 4.5 6.9
1.1
1.9
1.7
3.9 (0.3) 0.0
2.7
TCS 2.5 1.6 3.5 3.9
0.5
2.1
3.1
1.0 2.0 1.7
2.7
Wipro 3.7 1.2 0.2 3.1
1.4
2.7
2.0*
0.9 0.6 1.7
(1.2)
HCL Tech 6.2 2.7 2.9 1.2
2.1
1.7
6.0*
2.8 3.0 3.8
3.2
Source: Company Data, PL Research, Wipro and HCL Tech would have impact of acquisitions for the quarter EBITDA Margins vs. Average exchange rate EBIDTA Margin (%) 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18
Avg Rate (USD v/s INR) 62.2 62.1 63.5
65.4
66.0
67.7
67.1
66.9 67.7
66.6
64.5
Infosys 28.7 27.8 26.2
27.8
27.2
28.0
26.5
27.3 27.6
27.2
25.7
TCS 28.8 29.2 28.1
28.8
28.3
27.8
26.7
27.7 27.7
27.4
25.4
Wipro ( Consolidated Margin) 22.3 22.7 21.3
21.8
20.8
20.6
19.5
19.3 20.4
20.1
19.0
HCL Tech 25.0 22.6 21.5
21.9
21.5
22.2
22.2
21.8 22.2
22.0
21.5
Source: Company Data, PL Research July 11, 2017 92
Apr‐Jun 2017 Earnings Preview
Stock Performance Absolute
1M
3M
Relative to Sensex
6M
12M
1M
3M
6M
12M
HCL Technol ogi es
(1.2) 2.1
1.7
17.9
(2.6) (5.1) (16.2) 0.9
Hexa wa re Technol ogi es
2.4
16.2
21.5
9.7
1.0
Infos ys
1.1
0.6
(1.2) (17.2)
(0.4) (6.6) (19.1)
(34.1)
Mi ndtree
(1.5) 18.9
8.7
(19.0)
(2.9) 11.7
(9.2)
(35.9)
Mpha s i s
(4.6) 9.7
14.8
7.8
(6.1) 2.5
(3.1)
(9.1)
NIIT Technol ogi es
(0.8) 31.5
31.1
12.3
(2.3) 24.2
13.2
(4.6)
Pers i s tent Sys tems
5.9
18.1
5.6
(1.6) 4.5
Ta ta Cons ul ta ncy Servi ces
(2.8) 0.8
5.4
0.6
Tech Ma hi ndra
(0.5)
Wi pro
0.0
9.0
(7.2)
(12.3)
(18.5)
(4.2) (6.4) (12.5)
(16.3)
(13.1) (18.7) (22.4)
(1.9) (20.4) (36.6)
(39.3)
6.7
(1.4) (0.6) (5.2)
(21.4) 12.7
(4.4)
10.9
3.6
Source: Bloomberg, PL Research Summary Financials ‐ Quarterly (Rs m) Q1FY18E
HCL Technol ogi es
Hexa wa re Technol ogi es
Infos ys
Mi ndtree
Mpha s i s
NIIT Technol ogi es
July 11, 2017 Q1FY17 YoY gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
Sa l es
121,879
120,530
1.1
113,360
7.5
514,971
468,365
10.0
EBITDA
26,204
26,490
(1.1) 25,210
3.9
109,558
103,330
6.0
Margins (%)
21.50
22.0
(48)bps 22.2
22.1
(79)bps
PAT
20,553
23,280
(11.7) 20,430
0.6
86,702
84,750
2.3
Sa l es
9,753
9,605
1.5
8,697
12.1
19,358
16,899
14.6
EBITDA
1,639
1,677
(2.3) 1,400
17.0
3,316
2,667
24.3
70 bps 17.1
(66)bps 16.1
(74)bps 21.3
Margins (%)
16.8
17.5
15.8
135 bps
PAT
1,202
1,139
5.6
999
20.4
2,341
1,841
27.2
Sa l es
170,506
171,200
(0.4) 167,820
1.6
720,476
684,850
5.2
EBITDA
43,820
46,580
(5.9) 44,470
(1.5) 191,985
186,050
3.2
Margins (%)
25.7
27.2
(151)bps 26.5
(80)bps 26.6
27.2
(52)bps
PAT
34,064
36,280
(6.1) 34,360
(0.9) 148,517
143,530
3.5
Sa l es
13,005
13,181
(1.3) 13,276
(2.0)
55,715
52,364
6.4
EBITDA
1,665
1,869
(10.9) 1,951
(14.7)
7,866
7,181
9.5
(190)bps 14.1
Margins (%)
12.8
14.2
PAT
1,002
972
3.1
Sa l es
14,762
15,059
EBITDA
2,244
2,393
Margins (%)
15.2
15.9
PAT
1,862
1,934
Sa l es
6,863
7,447
(7.8) 6,707
2.3
EBITDA
1,078
1,524
(29.3) 1,015
6.2
Margins (%)
15.70
20.5
(476)bps 15.1
PAT
582
863
(32.6) 1,007
Source: Company Data, PL Research Q4FY17 QoQ gr. (%)
(138)bps 14.7
13.7
41 bps
5,007
4,186
19.6
(2.0) 15,167
(2.7) 61,883
60,763
1.8
(6.2) 2,445
(8.2) 9,498
9,689
(2.0)
(69)bps 16.1
(92)bps 15.3
15.9
(60)bps
(3.7) 2,043
(8.9) 7,624
8,188
(6.9)
28,581
28,021
2.0
4,785
4,846
(1.2)
57 bps 16.7
17.3
(55)bps
2,281
19.4
1,235
(18.8)
(42.3)
2,722
*HCL Tech – FY16 nos. are for 9M only hence YoY growth is not comparable 93
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Q1FY18E
Pers i s tent Sys tems
Ta ta Cons ul ta ncy Servi ces
Tech Ma hi ndra
Wi pro
Q4FY17 QoQ gr. (%)
Q1FY17 YoY gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
Sa l es
7,232
7,271
(0.5) 7,017
3.1
31,267
28,783
8.6
EBITDA
1,164
1,188
(2.0) 1,057
10.2
5,133
4,539
13.1
15.8
65 bps
PAT
Margins (%)
805
16.1 16.3
728
10.7
(24)bps 15.1
732
10.0
3,428
3,014
13.7
Sa l es
297,204
296,420
0.3
293,050
1.4
1,252,043
1,179,660
6.1
EBITDA
75,490
81,330
(7.2) 78,380
338,099
323,110
4.6
Margins (%)
25.40
27.4
(204)bps 26.7
(135)bps 27.0
PAT
60,384
66,080
(8.6) 63,170
(4.4)
Sa l es
74,289
74,950
(0.9) 69,209
7.3
EBITDA
9,286
8,987
3.3
10,290
51 bps 14.9
104 bps 16.4
(3.7)
27.4
(39)bps
267,628
262,890
1.8
308,628
291,408
5.9
(9.8) 42,503
41,843
1.6
(237)bps 13.8
14.4
(59)bps
(13.5) 30,563
28,409
7.6
Margins (%)
12.50
12.0
PAT
6,490
5,879
10.4
Sa l es
136,436
139,875
(2.5) 135,992
0.3
561,962
550,402
2.1
EBITDA
25,923
28,182
(8.0) 26,528
(2.3)
108,205
109,127
(0.8)
Margins (%)
19.0
20.1
(51)bps 19.3
19.8
(57)bps
PAT
19,887
18,394
84,707
0.1
7,500
(115)bps 19.5
8.1
20,518
(3.1)
84,771
Source: Company Data, PL Research Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) 2017
2018E
2019E
Apr‐Jun'17
Jan‐Mar'17 QoQ gr. (%)
Apr‐Jun'16 YoY gr. (%)
Net Sales
3,379,964
3,574,945
3,904,301
Net Sa l es
851,930
855,538
(0.4) 830,295
2.6
Growth (%)
13.1
5.8
9.2
EBITDA
188,512
200,220
(5.8) 192,746
(2.2)
EBITDA
795,708
824,309
899,643
Margin (%)
22.1
23.4
Margin (%)
23.5
23.1
23.0
PAT (Excl . Ex Items )
146,832
155,549
PAT
626,126
641,659
705,768
Growth (%)
8.5
2.5
10.0
16.1
15.7
14.2
PE (x)
23.2
(109)bps
(5.6) 151,994
(128)bps
(3.4)
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. July 11, 2017 94
Apr‐Jun 2017 Earnings Preview
HCL Technologies Ra ti ng
BUY
Pri ce (Rs )
851
Ta rget Pri ce (Rs )
970
M/Ca p (Rs bn)
1,171.6
Sha res o/s (m)
1,377.3
Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
We expect HCL Tech to report 4% QoQ USD revenue growth for the quarter (3.2% cc growth). Cross‐currency would be a tailwind of 80bps. Geometric acquisition would be consolidated for additional two months. Hence, organic growth for the quarter would be 2.4% QoQ in USD (1.6% in constant currency). We model EBITDA margins at 21.5% would represent a drop of 50bps QoQ. We expect HCL Tech to deliver 12% USD revenue growth for FY18 (Organic growth would be 7% and rest would be on account of acquisitions). HCL Tech has guided for USD revenue growth of 10‐12% for FY18 and EBIT margin guidance band of 19.5‐20.5% for FY18E. We expect company to retain its growth and margin guidance band. We retain ‘BUY’ with TP of Rs970 (14x FY19E). Quarterly Table (Rs m) Net Sa l es
468,365
514,971
574,364
EBITDA
103,330
109,558
121,603
22.1
21.3
21.2
84,750
86,702
95,908
60.0
63.0
69.6
48.4
4.9
10.6
RoE (%)
28.0
26.0
25.8
PE (x)
14.2
13.5
12.2
Operating Metrics
P / BV (x)
3.7
3.4
2.9
Revenue (US$ m)
EV / E (x)
7.7
9.6
8.2
*HCL Tech – FY16 nos. are for 9M only hence YoY growth is not comparable Margin (%)
PAT
EPS (Rs )
Growth (%)
Y/e March
Net Sales
Q1
FY18E
Q4
FY17
QoQ gr. (%)
Q1
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
121,879
120,530
1.1
113,360
514,971
468,365
10.0
26,204
26,490
(1.1)
25,210
109,558
103,330
6.0
21.5
22.0
(48)bps
22.2
21.3
22.1
(79)bps
Reported PAT
20,553
23,280
(11.7)
20,430
86,702
84,750
2.3
PAT (Excl. Ex Items)
20,553
23,280
(11.7)
20,430
86,702
84,750
2.3
1,890 1,816
4.1
1,691 7,847 6,975
12.5
EBITDA
Margin (%)
Hexaware Technologies Ra ti ng
BUY
Pri ce (Rs )
245
Ta rget Pri ce (Rs )
255
M/Ca p (Rs bn)
72.7
Sha res o/s (m)
296.5
Key Figures (Rs m) Y/e Dec
CY16
Net Sa l es
EBITDA
Margin (%)
CY17E
CY18E
35,349
39,418
44,181
5,993
6,676
7,521
17.0
16.9
17.0
4,171
4,697
5,233
13.8
15.8
17.7
5.9
14.7
11.4
RoE (%)
26.5
26.6
26.8
PE (x)
17.8
15.5
13.9
P / BV (x)
4.3
4.0
3.5
EV / E (x)
11.4
10.3
9.0
PAT
EPS (Rs )
Growth (%)
July 11, 2017 We expect HEXW to report 4.5% QoQ growth in USD terms (4.5% Constant Currency growth). Management guided that Q3CY17 could be soft owing to insourcing from a Travel account. However, this is already factored into our assumptions. Traction in Top 10 clients would be keenly watched as HEXW’s growth momentum depends on traction in large accounts. We expect EBITDA margin at 17%, down 70bps QoQ, led by Rupee appreciation. However, company has favourable hedge position for Q2CY17 which could aid reported PAT for the quarter. We model HEXW to deliver 14% USD revenue growth for CY17E which would be among the strongest growth in the sector. This is enabling HEXW trade at higher P/E multiples (stock trades at 13.8x CY18E EPS). We rate ‘BUY’ with TP of Rs255/sh (14.5x CY18E EPS). Quarterly Table (Rs m) Net Sales
Q2
CY17E
9,753
Q1
CY17
9,605
QoQ gr. (%)
1.5
EBITDA
1,639
1,677
(2.3)
Margin (%)
16.8
17.5
(66)bps
Reported PAT
1,202
1,139
5.6
999 2,341 1,841
27.2
PAT (Excl. Ex Items)
1,202
1,139
5.6
999 2,341 1,841
27.2
151 145
4.5
130 296 252
17.7
Y/e Dec
Q2
H1
H1
CY16
CY17E
CY16
8,697 19,358 16,899
YoY gr. (%)
14.6
1,400 3,316 2,667
24.3
16.1
17.1
15.8
135 bps
Operating Metrics
Revenue (US$ m)
95
Apr‐Jun 2017 Earnings Preview
Infosys Ra ti ng
BUY
Pri ce (Rs )
959
Ta rget Pri ce (Rs )
1,140
M/Ca p (Rs bn)
2,194.3
Sha res o/s (m)
2,288.0
Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sa l es
684,850
720,476
795,602
Quarterly Table (Rs m) EBITDA
186,050
191,985
210,491
Y/e March
Margin (%)
PAT
27.2
26.6
26.5
143,530
148,517
162,730
62.7
64.9
71.1
EPS (Rs )
Growth (%)
6.4
3.5
9.6
RoE (%)
22.0
20.4
20.3
PE (x)
15.3
14.8
13.5
P / BV (x)
3.2
2.9
2.6
EV / E (x)
9.7
9.1
8.1
Mphasis Ra ti ng
Accumulate
Pri ce (Rs )
612
Ta rget Pri ce (Rs )
600
M/Ca p (Rs bn)
118.5
Sha res o/s (m)
193.6
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
FY17
FY18E
FY19E
60,763
61,883
66,499
9,689
9,498
10,243
15.9
15.3
15.4
8,188
7,624
8,183
Q1
FY18E
Net Sales
EBITDA
Margin (%)
Q4
FY17
170,506
171,200
43,820
25.7
(5.9)
44,470 191,985
186,050
3.2
(151)bps
27.2
(52)bps
34,064
36,280
(6.1)
34,360 148,517
143,530
3.5
34,064
36,280
(6.1)
34,360 148,517
143,530
3.5
2,644 2,569
2.9
2,501 10,976 10,208
7.5
Operating Metrics
Revenue (US$ m)
We expect Mphasis to report consolidated revenue growth of 1.6% QoQ in USD terms. HP Channel (24.4% of revenues) is likely to grow modestly on a sequential basis. Softness in a large account is likely to lead to moderate growth in Direct Channel Mature Markets (Ex. Digital Risk) and we model this channel to grow by 2.5% QoQ and contribute to 59% of total revenues. Digital risk is likely to remain tepid for the quarter. EBITDA margins are likely to decline by 70bps on a sequential basis owing to stronger Rupee and Investments. We expect Mphasis’ USD revenues to grow by 4% YoY for FY18E. Strategy and execution under the new CEO (Mr Nitin Rakesh) would we watched. Retain ‘Accumulate’ with TP of Rs600/sh (14x FY19E EPS). Quarterly Table (Rs m) Y/e Mar
Net Sales
Q1
FY18E
Q4
FY17
14,762
15,059
2,244
15.2
(6.2)
2,445 9,498
15.9
(69)bps
1,862
1,934
PE (x)
PAT (Excl. Ex Items )
1,862
9.3
10.4
9.5
July 11, 2017 12M
FY17
2,393
Reported PAT
EV / E (x)
12M
FY18E
60,763
13.9
Q1
FY17
15,167 61,883
12.3
EBITDA
Margin (%)
QoQ gr. (%)
(2.0)
12.7
2.0
26.6
Reported PAT
RoE (%)
14.5
26.5
5.2
PAT (Excl. Ex Items )
42.3
2.1
YoY gr. (%)
27.2
7.3
15.5
12M
FY17
46,580
39.4
1.9
12M
FY18E
684,850
1.2
15.7
Q1
FY17
167,820 720,476
38.9
P / BV (x)
QoQ gr. (%)
(0.4)
13.0
Growth (%)
We expect Infosys to report 2.9% QoQ growth in USD revenues for the quarter (cc growth at 2.9% QoQ). Infosys has guided for 6.5‐8.5% USD revenue growth in constant currency for FY18. We expect the company to maintain constant currency revenue growth guidance. We have modeled Infosys’ USD revenues to grow by 7.8% for FY18E. Company has pushed wage hikes to July 2017; hence, Q1FY18 will not have the impact of wage hikes. However, headwinds from Rupee appreciation and visa expenses will weigh on margins. We model EBITDA margins at 25.7% for Q1FY18, down 150bps QoQ. We model EBIT margin at 23.1%, down 150bps QoQ. We expect Infosys to maintain EBIT margin guidance band of 23‐25% for FY18E. Net cash on balance sheet at Rs387bn which is Rs169/sh and forms 18.2% of Mcap. Company aims to return Rs130bn to shareholders in FY18 (apart from its regular dividend). Our TP is Rs1140/sh( 16x FY19E EPS). YoY gr. (%)
1.8
9,689
(2.0)
15.3
15.9
(60)bps
(3.7)
2,043 7,624
8,129
(6.2)
1,934
(3.7)
2,043 7,624
8,188
(6.9)
225 222
1.6
224 928 894
3.8
16.1
Operating Metrics
Revenue (US$ m)
96
Apr‐Jun 2017 Earnings Preview
MindTree Ra ti ng
Reduce
Pri ce (Rs )
530
Ta rget Pri ce (Rs )
500
M/Ca p (Rs bn)
89.0
Sha res o/s (m)
168.0
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY19E
52,364
55,715
62,555
7,181
7,866
9,859
13.7
14.1
15.8
4,186
5,007
6,354
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
24.9
29.8
37.8
(30.7) 19.6
26.9
We expect MindTree to report 3.4% QoQ USD revenue growth for Q1FY18 (3% in cc terms). Mindtree would need to show continued acceleration to deliver its stated guidance of double‐digit USD revenue growth for FY18E. We model EBITDA margin at 12.8%, down 140bps QoQ, mainly led by Rupee appreciation and visa expenses. We believe that margin expansion in Mindtree will be a gradual journey. We have currently modeled Mindtree to deliver 10% USD revenue growth for FY18E and company needs to deliver strong growth over remaining three quarters to achieve our target. Pace of ramp‐up of new deals won in Q3FY17 is crucial for growth trajectory. Our current EPS estimates are Rs30.6/38.2. At CMP, stock is trading at 13.9x FY19E EPS which leaves unfavorable risk return. We have ‘Reduce’ on Mindtree. The company has recently announced buyback (Rs2.7bn for 2.6% of equity at Rs625/sh which is offering some support for the stock. Quarterly Table (Rs m) Q1
FY18E
13,005
Q4
FY17
13,181
QoQ gr. (%)
(1.3)
Q1
12M
FY17
FY18E
13,276 55,715
12M
FY17
52,364
1,665
1,869
(10.9)
1,951 7,866
7,181
9.5
Margin (%)
12.8
14.2
(138)bps
14.7
14.1
13.7
41 bps
Reported PAT
1,002
972
3.1
1,235 5,007
4,186
19.6
PAT (Excl. Ex Items)
1,002
972
3.1
1,235 5,007
4,186
19.6
202 196
3.4
199 849 780
8.9
Y/e March
Net Sales
EBITDA
RoE (%)
16.8
18.3
20.5
PE (x)
21.3
17.8
14.0
P / BV (x)
3.5
3.1
2.7
Operating Metrics
EV / E (x)
11.6
10.4
7.9
Revenue (US$ m)
YoY gr. (%)
6.4
NIIT Technologies WE expect NIIT Tech revenues at US$104.5m, down 3.5% QoQ. NIIT Tech had exeptional revenues of US$4m owing to reversal of revenues from a Government contract in Q4FY17. Hence, adjusted for the same, USD revenues would be flat QoQ for Q1FY18. EBITDA margins would drop by ~200bps QoQ led by wage hikes and Rupee appreciation. We model EBITDA margin at 15.7%, down 200bps QoQ (Q4FY17 adjusted EBITDA margin was at 17.6%). Stock has rallied substantially (up 30% over past three months) led by steady perfomance of EBITDA margins and strong free cash flow improvement. NIIT Tech trades at 11.5x FY19E EPS. NIIT Tech‘s USD revenues grew by 0.8% YoY in FY17. Recovery in growth momentum is the key for FY18E and we model 6% USD revenue growth for FY18. Retain ‘BUY’. Ra ti ng
BUY
Pri ce (Rs )
565
Ta rget Pri ce (Rs )
540
M/Ca p (Rs bn)
34.7
Sha res o/s (m)
61.4
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
FY19E
28,021
28,581
31,044
4,846
4,785
5,122
17.3
16.7
16.5
2,281
2,722
3,021
37.1
44.3
49.2
(18.9) 19.4
11.0
Quarterly Table (Rs m) Y/e March
Q1
FY18E
Net Sales
6,863
7,447
EBITDA
1,078
15.7
Margin (%)
Q4
FY17
QoQ gr. (%)
Q1
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
(7.8)
6,707 28,581
28,021
2.0
1,524
(29.3)
1,015 4,785
4,846
(1.2)
20.5
(476)bps
15.1
16.7
17.3
(55)bps
RoE (%)
13.7
14.7
14.7
Reported PAT
582
863
(32.6)
646 2,722
2,281
19.4
PE (x)
15.2
12.7
11.5
PAT (Excl. Ex Items)
582
863
(32.6)
1,007 2,722
2,281
19.4
P / BV (x)
2.0
1.8
1.6
Operating Metrics
EV / E (x)
6.0
5.9
5.3
Revenue ($ mn)
(3.5) 100 433 411
5.5
FY17
July 11, 2017 104 108
97
Apr‐Jun 2017 Earnings Preview
Persistent Systems Ra ti ng
BUY
Pri ce (Rs )
667
Ta rget Pri ce (Rs )
710
M/Ca p (Rs bn)
53.3
Sha res o/s (m)
80.0
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY19E
28,783
31,267
35,362
4,539
5,133
5,930
15.8
16.4
16.8
3,014
3,428
3,942
37.7
42.8
49.3
1.3
13.7
15.0
17.3
17.3
17.5
Reported PAT
805
728
10.7
732 3,428
3,014
13.7
PAT (Excl. Ex Items)
805
728
10.7
732 3,428
3,014
13.7
112 109
2.8
105 476 429
11.0
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
We expect Persistent to deliver 2.8% QoQ in USD revenue growth. Growth would be driven by IBM (Q4 is seasonally weak for IBM and Q1 shows bounce back). Services SBU has the potential to deliver modest growth in Q1. Digital SBU is likely to show a relatively softer growth for the quarter. We expect consolidated USD revenues to grow by 2.8% QoQ. We expect EBITDA margins at 16.1%, down 180bps based on Q4FY17 adjusted EBITDA margins (which was 17.9%). Visa expense (100bps) and Rupee appreciation (120bps) are the key margin headwinds which will be partially negated by G&A leverage led by growth. Persistent gives wage hikes effective Q2; hence, commentary on wage hikes would be watched. Street is building an improvement in margins for FY18E/FY19E and commentary on direction of margins is the key. We expect Persistent to deliver 10.5% USD revenue growth for FY18E. We retain ‘BUY’ with TP of Rs710/sh ( 14.5x FY19E EPS). RoE (%)
PE (x)
17.7
15.6
13.5
P / BV (x)
2.9
2.5
2.2
EV / E (x)
9.9
8.3
6.7
Quarterly Table (Rs m) Net Sales
Q1
FY18E
7,232
Q4
FY17
7,271
QoQ gr. (%)
(0.5)
EBITDA
1,164
1,188
(2.0)
Margin (%)
16.1
16.3
(24)bps
Y/e March
Q1
12M
FY17
FY18E
7,017 31,267
12M
FY17
28,783
YoY gr. (%)
8.6
1,057 5,133
4,539
13.1
15.1
15.8
65 bps
16.4
Operating Metrics
Revenue (US$ mn)
Tata Consultancy Services We expect TCS revenues to grow by 3.5% QoQ in USD (2.9% cc growth). Cross‐
currency would be a tailwind of ~70bps for the quarter. Traction in BFSI vertical would be keenly watched. We expect EBITDA margin at 25.4% for Q1FY18, down 200bps QoQ owing to rupee appreciation and wage hikes. We expect EBIT margin for Q1FY18 at 23.7%, down 200bps QoQ. Management is likely to retain target EBIT margin guidance band of 26‐28%. We believe achieving this target would be challenging, considering stronger Rupee. We expect TCS to deliver 8.5% USD revenue growth for FY18E. Traction in Digital Business which accounts to 17.9% of company’s revenues would be also be watched. Our target is Rs2600/sh (17x FY19E EPS). Retain ‘Accumulate’. Ra ti ng
ACCUMULATE
Pri ce (Rs )
2,441
Ta rget Pri ce (Rs )
2,600
M/Ca p (Rs bn)
4,671.4
Sha res o/s (m)
1,913.9
Key Figures (Rs m) Y/e March
Net Sa l es
FY17
FY18E
FY19E
1,179,660 1,252,043 1,363,721
EBITDA
323,110
338,099
366,487
27.4
27.0
26.9
262,890
267,628
293,648
133.4
139.8
153.4
8.6
4.8
9.7
RoE (%)
32.4
27.7
25.8
PE (x)
18.3
17.5
15.9
Margin (%)
PAT
EPS (Rs )
Growth (%)
P / BV (x)
5.4
4.5
3.8
EV / E (x)
13.2
12.7
11.4
July 11, 2017 Quarterly Table (Rs m) Q1
FY18E
297,204
Q4
FY17
296,420
QoQ gr. (%)
0.3
75,490
81,330
(7.2)
25.4
27.4
(204)bps
Reported PAT
60,384
66,080
PAT (Excl. Ex Items)
60,384
Y/e March
Net Sales
EBITDA
Margin (%)
Q1
12M
12M
FY17
FY18E
FY17
293,050 1,252,043 1,179,660
78,380 338,099
YoY gr. (%)
6.1
323,110
4.6
27.0
27.4
(39)bps
(8.6)
63,170 267,628
262,890
1.8
66,080
(8.6)
63,170 267,628
262,890
1.8
4,608 4,452
3.5
4,362 19,075 17,575
8.5
26.7
Operating Metrics
Revenue (US$ m)
98
Apr‐Jun 2017 Earnings Preview
Tech Mahindra Ra ti ng
Buy
Pri ce (Rs )
385
Ta rget Pri ce (Rs )
500
M/Ca p (Rs bn)
341.8
Sha res o/s (m)
887.7
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY19E
291,408
308,628
335,127
41,843
42,503
49,439
14.4
13.8
14.8
28,409
30,563
33,857
32.0
34.4
38.1
(8.8) 7.6
10.8
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
We expect TECHM USD revenues to decline by 0.5% QoQ (Organic USD revenues to decline by 2% QoQ). In constant currency, organic revenues are likely to decline by 2.8% QoQ for Q1FY18. This is led by seasonality in Comviva, spillover of pricing discount given to a Telecom client and softer Enterprise vertical (Q4FY17 had project‐based revenues in Enterprise vertical). We model Q1FY18 EBITDA margin at 12.5%, up 50bps QoQ. Rupee appreciation and visa expenses would negate tailwinds from absence of one‐off expenses (US$20m). We believe recovery in EBITDA margin trajectory is key for the stock. Though valuations are cheap (10x FY19E EPS), core perfomance continues to disappoint and Q1 commentary is weak. Our target price is Rs500/sh (13x FY19E EPS). Retain ‘BUY’. Quarterly Table (Rs m) Q1
FY18E
74,289
Q4
FY17
74,950
EBITDA
9,286
8,987
3.3
Margin (%)
12.5
12.0
51 bps
Y/e March
Net Sales
QoQ gr. (%)
(0.9)
Q1
12M
FY17
FY18E
69,209 308,628
12M
FY17
291,408
10,290 42,503
41,843
1.6
14.4
(59)bps
14.9
13.8
YoY gr. (%)
5.9
RoE (%)
17.2
16.5
16.4
Reported PAT
6,490
5,879
10.4
7,500 30,563
28,409
7.6
PE (x)
12.0
11.2
10.1
PAT (Excl. Ex Items)
6,490
5,879
10.4
7,500 30,563
28,409
7.6
P / BV (x)
2.0
1.8
1.6
EV / E (x)
6.9
6.3
5.0
(0.5) 1,032 4,676 4,351
7.5
Operating Metrics
Revenue (US$ mn)
1,126 1,131
Wipro We expect Wipro’s IT services business revenues to decline by 0.5% QoQ in USD (1.3% decline in revenues in Constant Currency) inline with its guidance ( (2%) ‐ 0% QoQ decline in revenues). Weakness in Healthcare vertical and softness in India and Middle East (led by seasonality) would weigh on growth. We note that Wipro has had a traditionally soft Q1 in the IT services business. We expect Wipro to guide for 1‐2.5% QoQ growth in USD revenues for Q2FY18E. Wipro gives wage hikes effective June and hence, Q1 would have only a partial impact of wage hikes. We model IT services EBIT margin at 17% for Q1FY18E (v/s 17.6% delivered in Q4FY17). Rupee appreciation and partial impact of wage hike would weigh on margins for the quarter. Wipro has a net cash of Rs209.4bn on the balance sheet as on Q4FY17 (Rs43/sh). We see scope for company announcing tender buyback post Q1FY18 results which could support the stock . Ra ti ng
Reduce
Pri ce (Rs )
269
Ta rget Pri ce (Rs )
250
M/Ca p (Rs bn)
1,306.5
Sha res o/s (m)
4,866.0
Key Figures (Rs m) Y/e March
FY18E
FY19E
Net Sa l es
550,402
561,962
595,845
Quarterly Table (Rs m) EBITDA
109,127
108,205
112,947
Y/e March
19.8
19.3
19.0
84,707
84,771
92,894
17.4
17.4
19.1
(3.3) 0.1
9.6
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
16.8
14.5
13.9
PE (x)
15.4
15.4
14.1
P / BV (x)
2.4
2.1
1.8
EV / E (x)
9.6
8.9
7.7
FY17
July 11, 2017 Q1
FY18E
136,436
Q4
FY17
139,875
25,923
28,182
(8.0)
19.0
20.1
(115)bps
Reported PAT
19,887
18,394
PAT (Excl. Ex Items)
19,887
18,394
Net Sales
EBITDA
Margin (%)
QoQ gr. (%)
(2.5)
Q1
12M
FY17
FY18E
135,992 561,962
12M
FY17
550,402
26,528 108,205
YoY gr. (%)
2.1
109,127
(0.8)
19.3
19.8
(57)bps
8.1
20,518 84,771
84,707
0.1
8.1
20,518 84,771
84,707
0.1
(0.5) 1,931 8,016 7,705
4.0
19.5
Operating Metrics
Revenue (US$ m)
1,945 1,955
99
Apr‐Jun 2017 Earnings Preview
Kamlesh Bagmar [email protected] +91‐22‐6632 2237 Amit Khimesra [email protected] +91‐22‐6632 2244 Top picks Jindal Steel & Power Tata Steel Hindalco Industries Metals & Mining World steel production grew 3.6% YoY to 285m tonnes in Apr‐May 2017. China’s steel production grew 3.7% YoY to 145m tonnes on the back of strong rebound in domestic demand. RoW’s production grew in line with Chinese steel production of 3.6% at 140m tonnes driven by reduction in Chinese exports and anti‐dumping measures on steel imports. Growth in RoW’s production was led by EU, USA, India and partially negated by South Korea. EU’s production grew 4.2% YoY at 29mt on account of strong domestic demand and reduced imports from China. USA’s production grew 0.8% on the back of lacklustre demand. Production in India grew by 6.7% YoY to 16.7mt as we turned to net exporter. South Korea’s production decreased by 2.8% YoY to 11.1mt. Movement in Crude Steel Production China World steel
World steel ex China
May‐17
Mar‐17
Jan‐17
Nov‐16
Sep‐16
Jul‐16
May‐16
Mar‐16
Jan‐16
Nov‐15
Sep‐15
Jul‐15
May‐15
Mar‐15
Jan‐15
Nov‐14
Sep‐14
Jul‐14
May‐14
(%)
10.0
8.0
6.0
4.0
2.0
0.0
‐2.0
‐4.0
‐6.0
‐8.0
‐10.0
Source: World Steel, PL Research Average capacity utilisation levels in Apr‐May’17 increased by 160bps YoY to 72.7%. Movement in World Steel capacity utilisation 82.0
79.0
(%)
76.0
73.0
70.0
67.0
Source: World Steel, PL Research July 11, 2017 May‐17
Mar‐17
Jan‐17
Nov‐16
Sep‐16
Jul‐16
May‐16
Mar‐16
Jan‐16
Nov‐15
Sep‐15
Jul‐15
May‐15
Mar‐15
Jan‐15
Nov‐14
Sep‐14
Jul‐14
May‐14
64.0
100
Apr‐Jun 2017 Earnings Preview
Average Chinese steel prices (including 17% VAT) fall by 9.6% QoQ or US$51/t to US$480 on account of restriction on supplies, weak demand and higher input prices. China HRC price 600
(US$ / tonne)
550
500
450
400
350
300
Jun‐17
May‐17
Apr‐17
Mar‐17
Feb‐17
Jan‐17
Dec‐16
Nov‐16
Oct‐16
Sep‐16
Aug‐16
Jul‐16
Jun‐16
250
Source: Bloomberg, PL Research Average HRC prices in North America fell 4.8% QoQ or US$31/t to US$605/t due to seasonal factors and reduced demand. North America HRC Price 700
(US$ / short tonne)
650
600
550
500
450
400
Jun‐17
May‐17
Apr‐17
Mar‐17
Feb‐17
Jan‐17
Dec‐16
Nov‐16
Oct‐16
Sep‐16
Aug‐16
Jul‐16
Jun‐16
May‐16
Apr‐16
Mar‐16
Feb‐16
Jan‐16
350
Source: Bloomberg, PL Research July 11, 2017 101
Apr‐Jun 2017 Earnings Preview
Average HRC price in Europe fall by 6.5% QoQ or US$37/t to US$531 on account of reduced imports from China and increase in domestic supply leading to excess in domestic market. Europe HRC Price 640
(US$ / tonne)
590
540
490
440
390
340
Jun‐17
May‐17
Apr‐17
Mar‐17
Feb‐17
Jan‐17
Dec‐16
Nov‐16
Oct‐16
Sep‐16
Aug‐16
Jul‐16
Jun‐16
290
Source: Bloomberg, PL Research Average spot iron ore prices (CIF China) fell 28.6% QoQ or US$24/t to US$61 due to sharp fall in Chinese demand and excess supply. Indian origin Iron Ore (63% Fe) Export Prices (CIF) to China 105
(US$ / tonne)
95
85
75
65
55
45
Jun‐17
May‐17
Apr‐17
Mar‐17
Feb‐17
Jan‐17
Dec‐16
Nov‐16
Oct‐16
Sep‐16
Aug‐16
Jul‐16
Jun‐16
35
Source: Bloomberg, PL Research. July 11, 2017 102
Apr‐Jun 2017 Earnings Preview
Average Ferrous scrap prices fell 0.5% QoQ or US$1/t to US$255/t, tracking strong margins of steel mills. Jun‐17
Apr‐17
Feb‐17
Dec‐16
Oct‐16
Aug‐16
Jun‐16
Apr‐16
Feb‐16
Dec‐15
Oct‐15
Aug‐15
350
330
310
290
270
250
230
210
190
170
150
Jun‐15
(US$ / short tonne)
Rotterdam Scrap Prices Source: Bloomberg, PL Research Spreads in USA improved on account of lower costs. Spreads in China recovered to positive territory due to better steel prices and lower costs. Spreads in Europe were up due to lower costs partially negated by weak steel prices. Spreads in China bottomed‐out during beginning of the quarter and expect possible increase in prices in the coming months. Jun‐17
Apr‐17
Feb‐17
Dec‐16
Oct‐16
Aug‐16
Jun‐16
Apr‐16
Europe
Feb‐16
Dec‐15
Oct‐15
Jun‐15
Apr‐15
Feb‐15
Dec‐14
Oct‐14
Aug‐14
China
Aug‐15
US
300
250
200
150
100
50
0
‐50
‐100
‐150
Jun‐14
(US$ / Tonne)
Region‐wise spreads of Blast furnace producers Source: Bloomberg, PL Research July 11, 2017 103
Apr‐Jun 2017 Earnings Preview
Domestic steel demand was sluggish during the quarter, however the exports cushioned the pressure. We believe that the weakness in domestic demand is due to slower construction and infrastructure activities. We expect structural recovery in demand in the coming quarters on the back of increased govt spending on Infra and “Housing for All”/Credit Linked Subsidy Schemes. Thanks to anti‐dumping protection and stable global prices environment, earnings outlook for domestic steel companies continue to improve over a period. JSPL and Tata steel remains our top pick in the ferrous space, while stable operations and strong FCF generation drives our positive outlook on Hindalco. Stock Performance Absolute
Relative to Sensex
1M
3M
6M
12M
1M
3M
6M
12M
Coa l Indi a
(0.9)
(9.8)
(13.7)
(16.8)
(2.4)
(17.0)
(31.6)
(33.7)
Hi nda l co Indus tri es
(3.1) 0.5
19.3
54.4
(4.6)
(6.7) 1.4
Hi ndus ta n Zi nc
10.8
(6.7) 7.5
56.7
9.3
(13.9)
Ji nda l Steel & Power
9.3
5.3
79.8
93.2
7.8
(1.9) 61.9
76.3
JSW Steel
8.1
7.2
22.5
48.2
6.6
(0.1) 4.6
31.2
NMDC
2.0
(12.6)
(14.8) 24.2
0.5
(19.8)
Steel Authori ty of Indi a
9.5
(5.7) 19.2
35.3
8.0
(12.9) 1.3
18.4
Ta ta Steel
10.4
12.9
75.5
9.0
5.6
58.6
29.8
37.4
(10.4) 39.8
(32.7) 7.3
11.9
Source: Bloomberg, PL Research Summary Financials ‐ Quarterly (Rs m) Companies
Coa l Indi a
Hi nda l co Indus tri es
Hi ndus ta n Zi nc
Ji nda l Steel & Power
Q1FY18E
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
Sa l es
207,995
184,219
12.9
231,716
(10.2)
867,716
782,206
10.9
EBITDA
43,598
42,548
2.5
33,876
28.7
179,728
149,121
20.5
Margins (%)
21.0
23.1
634 bps 20.7
19.1
165 bps
PAT
31,348
30,653
2.3
27,178
92,678
3.6
Sa l es
98,935
75,847
30.4
110,261
(10.3) 1,184,669
1,001,838
18.2
EBITDA
12,833
11,247
14.1
13,472
(4.7) 143,298
124,359
15.2
Margins (%)
13.0
14.8
(186)bps 12.2
75 bps 12.1
12.4
(32)bps
PAT
4,723
2,943
60.5
5,025
(6.0) 53,191
19,041
179.4
Sa l es
48,539
25,015
94.0
62,602
(22.5)
196,991
167,679
17.5
EBITDA
25,556
9,127
180.0
37,480
(31.8)
110,010
89,934
22.3
Margins (%)
52.6
36.5
(722)bps 55.8
53.6
221 bps
PAT
20,725
8,871
79,763
16.2
Sa l es
57,550
45,361
26.9
60,908
(5.5) 296,538
204,091
45.3
EBITDA
13,582
8,647
57.1
13,523
0.4
60,445
40,167
50.5
Margins (%)
23.6
19.1
140 bps 20.4
19.7
70 bps
PAT
(2,588) (4,564)
(214)bps 14.6
1,616 bps 59.9
133.6
30,570
454 bps 22.2
NA
(3,029)
15.3
(32.2)
NA
96,042
92,677
(15,564) (19,090)
NA Source: Company Data, PL Research July 11, 2017 104
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
JSW Steel
NMDC
Steel Authori ty of Indi a
Ta ta Steel
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
Sa l es
164,730
117,080
40.7
166,562
(1.1)
646,891
556,046
16.3
EBITDA
29,444
32,694
(9.9) 31,649
(7.0)
133,147
121,742
9.4
Margins (%)
17.9
27.9
(1,005)bps 19.0
(113)bps 20.6
21.9
(131)bps
PAT
8,577
11,090
(22.7) 10,143
39,902
35,231
NA
Sa l es
28,667
17,207
66.6
28,713
(0.2) 110,885
88,288
25.6
EBITDA
15,722
8,164
92.6
11,754
33.8
62,098
38,443
61.5
Margins (%)
54.8
47.4
1,391 bps 56.0
43.5
1,246 bps
PAT
10,866
7,113
52.8
5,295
105.2
41,944
27,361
53.3
Sa l es
108,380
92,381
17.3
126,906
(14.6)
551,807
444,524
24.1
EBITDA
(2,217) 2,338
NA
(2,644)
31,325
380
NA
Margins (%)
(2.0) 2.5
NA 5.7
0.1
NA
739 bps 40.9
NA (2.1)
NA
(7,718)
NA
PAT
(8,826) (4,455)
(14,098)
(26,902)
NA
Sa l es
289,115
252,298
14.6
338,960
(14.7) 1,301,114
1,122,994
15.9
EBITDA
44,660
32,420
37.8
70,252
(36.4) 197,950
170,078
16.4
Margins (%)
15.4
12.8
260 bps 20.7
(528)bps 15.2
15.1
7 bps
PAT
12,249
3,164
(63.4) 60,010
39,476
287.2
33,435
NA
NA
52.0 Source: Company Data, PL Research Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) 2017
2018E
Apr‐Jun'17
2019E
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
Net Sales
4,367,667 5,156,612 5,482,390
Net Sa l es
1,003,911
809,406
24.0
1,172,755
(14.4)
Growth (%)
9.7 18.1 6.3
EBITDA
183,177
147,186
24.5
209,363
(12.5)
EBITDA
734,224 918,001 1,013,971
Margin (%)
18.2
18.2
6 bps
17.9
39 bps
77,074
54,814
40.6
100,898
(23.6)
Margin (%)
16.8 17.8 18.5
PAT (Excl . Ex Items )
PAT
247,558 354,104 409,556
Growth (%)
30.0 43.0 15.7
PE (x)
22.4 15.7 13.5
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. July 11, 2017 105
Apr‐Jun 2017 Earnings Preview
Coal India Ra ti ng
Reduce
Pri ce (Rs )
259
Ta rget Pri ce (Rs )
270
M/Ca p (Rs bn)
1,609.0
Sha res o/s (m)
6,207.4
Quarterly Table (Rs m) Y/e March
Net Sales
Key Figures (Rs m) EBITDA
Y/e March
FY17
Net Sa l es
782,206
EBITDA
867,716
FY19E
Q1
FY17
184,219
YoY gr. (%)
12.9
Q4
12M
12M
FY17
FY18E
FY17
231,716 867,716 782,206
YoY gr. (%)
10.9
43,598
42,548
2.5
33,876
179,728
149,121
20.5
21.0
23.1
(214)bps
14.6
20.7
19.1
165 bps
Reported PAT
31,348
30,653
2.3
27,178
96,042
92,678
3.6
PAT (Excl. Ex Items )
31,348
30,653
2.3
27,178
96,042
92,678
3.6
211,897
19.1
20.7
22.4
92,678
96,042
110,545
14.9
15.5
17.8
(33.9) 3.6
15.1
EPS (Rs )
Margin (%)
Q1
FY18E
207,995
944,080
179,728
PAT
Growth (%)
FY18E
149,121
Margin (%)
Operating Metrics
Coal des p. (mn tn)
138
133
3.3
152
579
543
6.7
Real. / tonne (Rs)
1,461
1,336
9.4
1,480
1,449
1,393
4.0
Total cost / tonne (Rs )
1,194
1,063
12.3
1,306
1,215
1,110
9.5
317
319
(0.9)
224
261
225
15.8
8.8
1,124
1,166
1,057
10.3
RoE (%)
14.9
16.7
20.0
EBITDA / tonne (Rs )
PE (x)
17.4
16.8
14.6
Cas h cos t / tonne (Rs)
1,128
1,037
2.7
2.9
3.0
Emp. cos t / tonne (Rs)
695
608
11.4
523
605
559
6.5
6.8
OBR adj / tonne (Rs )
30
19
61.8
84
48
52
(7.6)
P / BV (x)
EV / E (x)
8.8
7.6
Hindalco Industries Net revenue is expected to fall 10% QoQ to Rs99bn, largely driven by 3.2% increase /2.9% fall in LME and 2.2%/5.4% fall in Al and Cu volumes. Due to weak realisations in Al & Cu, EBITDA is expected to fall 4.7% QoQ to Rs12.8bn. Adjusted PAT is expected to fall 6% QoQ at Rs4.7bn. Ra ti ng
BUY
Pri ce (Rs )
196
Ta rget Pri ce (Rs )
260
M/Ca p (Rs bn)
439.0
Sha res o/s (m)
2,242.0
Quarterly Table (Rs m) Q1
FY18E
Q1
FY17
Y/e March
Key Figures (Rs m) Net Sales
98,935
75,847
EBITDA
12,833
13.0
Reported PAT
PAT (Excl. Ex Items )
Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
FY17
FY18E
FY19E
1,001,838 1,184,669 1,237,482
124,359
143,298
150,304
Margin (%)
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
18.2
30.4
110,261
11,247
14.1
13,472
14.8
(186)bps
12.2
4,723
2,943
60.5
5,025
53,191
18,997
180.0
4,723
2,943
60.5
5,025
53,191
19,041
179.4
310,000 308,000
0.6
1,184,669
1,001,838
143,298
124,359
15.2
12.1 12.4
(32)bps
12.4
12.1
12.1
19,041
53,191
61,673
8.5
23.7
27.5
60.5
179.4
15.9
Copper (Cu) prod (t)
105,000 65,000
61.5
111,000 400,000 376,000
6.4
4.6
11.2
11.7
LME‐Al (USD/t)
1,909 1,572
21.5
1,850 1,875 1,687
11.1
LME‐Cu (USD/t)
5,662 4,736
19.6
5,831 5,300 5,155
2.8
Operating Metrics
Alum. (Al) prod (t)
317,000 1,276,000 1,266,000
0.8
23.1
8.3
7.1
P / BV (x)
1.0
0.9
0.8
EBITDA‐Al (Rs m)
8,878 8,711
1.9
9,181 ‐
‐
0.0
EV / E (x)
8.2
6.8
6.1
EBITDA‐Cu (Rs m)
4,483 2,643
69.6
4,967 ‐
‐
0.0
Net revenue is expected to grow 13% YoY on the back of 9.4%/3.3% growth in realisations/despatches. Cost/t is expected to increase 8.8% YoY (Rs91/t) to Rs1,128 due to higher employee cost and OBR cost. EBITDA/t is expected to fall 0.9% YoY to Rs317. EBITDA is expected to rise by 2.5% YoY to Rs43.6bn and PAT is expected to grow by 2.3% due to lower interest income. July 11, 2017 106
Apr‐Jun 2017 Earnings Preview
Hindustan Zinc Rating
Accumulate
Price (Rs )
268
Target Price (Rs )
Net revenue is expected to fall 22.5% QoQ at Rs48.5bn, due to 10.6% QoQ lower refined zinc‐lead volumes at 236kt and 8.5%/5.4%/4.9% fall in zinc/lead/silver realisations. EBITDA is expected to fall 31.8% QoQ to Rs.25.6bn. PAT is expected to fall 32% QoQ to Rs20.7bn. 335
M/Cap (Rs bn)
1,131.5
Shares o/s (m)
4,225.3
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
FY17
YoY gr. (%)
94.0
Q4
12M
12M
FY17
FY18E
FY17
62,602 196,991 167,679
9,127
180.0
37,480
36.5
1,616 bps
59.9
20,725
10,369
99.9
30,570
92,677
79,763
16.2
20,725
8,871
133.6
30,570
92,677
79,763
16.2
28.1
Ttl. Refined metal‐tns 236,000
FY19E
167,679
196,991
208,142
89,934
110,010
115,032
EBITDA
Margin (%)
PAT
53.6
55.8
55.3
79,763
92,677
94,361
18.9
21.9
22.3
EPS (Rs )
Growth (%)
FY18E
(4.7) 16.2
RoE (%)
23.2
28.9
1.8
Net Sales
Q1
FY18E
48,539
Q1
FY17
25,015
EBITDA
25,556
52.6
Reported PAT
PAT (Excl. Ex Items)
Y/e March
Margin (%)
89,934
22.3
55.8 53.6
221 bps
Operating Metrics
14.2
12.2
12.0
Silver Sales Vol. (kg)
P / BV (x)
3.6
3.4
3.3
Zinc (US$)‐LME/tonne
EV / E (x)
8.7
7.1
6.8
Silver (Rs / Kg)
PE (x)
110,010
YoY gr. (%)
17.5
143,000
65.0
264,000
885,730
832,650
6.4
117,509
88,000
33.5
137,000
474,692
420,329
12.9
2,596
1,912
35.8
2,770
2,700
2,370
13.9
39,131
40,909
(4.3)
41,131
35,175
35,175
0.0
Jindal Steel & Power Standalone revenue is expected to fall 13.4% QoQ to Rs34.1bn, driven by 11.5% fall in volume and 1% fall in realisations. Standalone EBITDA is expected to fall 17.7% QoQ to Rs6.4bn on account of lower steel volumes and weak realisations. JPL revenue is expected to grow 28.1% QoQ due to increase in power supply, EBITDA is expected to grow 30% QoQ. Consolidated EBITDA is expected to see marginal improvement of 0.4% QoQ to Rs13.6bn on the back of better earnings in power business. Loss is expected to narrow to Rs2.6bn v/s loss of Rs3bn in Q4FY17. Rati ng
BUY
Price (Rs )
135
Ta rget Price (Rs )
170
M/Ca p (Rs bn)
123.1
Shares o/s (m)
914.9
Quarterly Table (Rs m) Q1
FY18E
Q1
FY17
Y/e March
Key Figures (Rs m) Net Sales
57,550
45,361
EBITDA
13,582
23.6
Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
FY17
FY18E
FY19E
204,091
296,538
341,446
40,167
60,445
81,738
19.7
20.4
23.9
(19,090)
(15,564)
5,136
(20.9)
(17.0)
5.6
(30.1) (18.5) (133.0)
(11.4)
(10.7)
3.7
(6.4)
(7.9)
24.0
Margin (%)
YoY gr. (%)
Q4
FY17
26.9
60,908
8,647
57.1
13,523
19.1
454 bps
22.2
12M
FY18E
12M
FY17
YoY gr. (%)
296,538
204,091
45.3
60,445
40,167
50.5
20.4 19.7
70 bps
Reported PAT
(2,588)
(10,822)
NA
(495) (15,564)
(22,813)
(31.8)
PAT (Excl. Ex Items)
(2,588)
(4,564)
NA
(3,029) (15,564)
(19,090)
(18.5)
Steel Sales Vol. (Tonn 805,000
920,000 4,270,598 3,155,521
35.3
Operating Metrics
780,000
3.2
6,417
5,606
14.5
Standalone PAT (2,163)
(2,767)
JPL‐Kwh sold (m)
2,910
1,997
3.8
3.3
(204)
(2,170)
Standalone EBITDA P / BV (x)
0.8
0.9
0.9
JPL‐Rate / Kwh
EV / E (x)
14.8
9.9
6.6
JPL‐PAT 7,805
40,274
24,738
(1,161)
(7,581)
(8,955)
45.7
2,177
11,878
8,769
35.5
13.6
4.0
3.4
3.4
0.0
(840)
(5,824)
(12,050)
NA
NA
62.8
NA
NA
July 11, 2017 107
Apr‐Jun 2017 Earnings Preview
JSW Steel Ra ti ng
Accumulate
Pri ce (Rs )
218
Ta rget Pri ce (Rs )
245
M/Ca p (Rs bn)
524.8
Sha res o/s (m)
2,403.0
Standalone revenue is expected to grow 24% QoQ on the back of 4.8% growth in volumes and 18.5%/Rs5,972/t growth in realisation. Impacted by increase in coking coal prices and higher iron ore cost, cost/t is expected to rise 32.2% QoQ or Rs7,545t. Due to higher costs, EBITDA/t is expected to fall by 15.2% or Rs1,412 QoQ to Rs7,864. Hence, consolidated EBITDA is expected to fall 9.9% QoQ to Rs29.4bn. PAT is expected to fall 22.7% QoQ to Rs8.6bn. Key Figures (Rs m) ‐ Consolidated Y/e March
FY17
FY18E
Quarterly Table (Rs m) FY19E
Net Sa l es
556,046
646,891
683,780
EBITDA
121,742
133,147
143,999
Margin (%)
PAT
21.9
20.6
21.1
35,231
39,902
45,253
14.7
16.6
18.8
EPS (Rs )
233.5
13.3
13.4
RoE (%)
Growth (%)
16.9
16.4
16.3
PE (x)
14.9
13.2
11.6
P / BV (x)
2.3
2.0
1.8
EV / E (x)
7.7
7.1
6.6
Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
164,730
Q1
FY17
117,080
29,444
32,694
17.9
27.9
YoY gr. (%)
40.7
(9.9)
(1,005)bps
Q4
12M
12M
FY17
FY18E
FY17
166,562 646,891 556,046
31,649
19.0
133,147
121,742
YoY gr. (%)
16.3
9.4
20.6 21.9 (131)bps
Reported PAT
8,577
11,090
(22.7)
10,143
39,902
35,231
PAT (Excl. Ex Items)
8,577
11,090
(22.7)
10,143
39,902
35,231
NA
13.3
Operating Metrics
Sales Vol. (mt)
Real. / tonne (Rs)
EBITDA / tonne (Rs)
3.5
3.3
4.8
4.0
15.5
14.8
4.7
38,824
32,691
18.8
39,948
38,504
34,940
10.2
7,864
9,276
(15.2)
7,605
7,899
7,360
7.3
NMDC Ra ti ng
Reduce
Pri ce (Rs )
118
Ta rget Pri ce (Rs )
122
M/Ca p (Rs bn)
372.1
Sha res o/s (m)
3,163.9
Net revenue is expected to fall marginally by 0.2% QoQ (66.6% YoY) to Rs28.6bn, partially offset by 5.7% QoQ fall in iron ore volumes to 9.2mt and 6.6% QoQ or Rs192/t rise in realisations to Rs3,088/t. Cost/t is expected to fall 18.3%/Rs311 QoQ to Rs1,382 due to higher scale and cost reduction initiatives. Thanks to lower cost, EBITDA/t is expected to grow 41.8% QoQ to Rs1,706. Hence, EBITDA is expected to grow 33.8% QoQ to Rs15.7bn. PAT is likely to grow 105% QoQ to Rs10.9bn. Key Figures (Rs m) Y/e March
Quarterly Table (Rs m) FY17
FY18E
FY19E
Net Sales
Q1
FY18E
28,667
Q1
FY17
17,207
EBITDA
15,722
8,164
92.6
11,754
54.8
47.4
739 bps
40.9
Reported PAT
10,866
7,113
52.8
5,543
41,944
25,891
62.0
PAT (Excl. Ex Items)
10,866
7,113
52.8
5,295
41,944
27,361
53.3
Total Volume (mt)
9.2
7.8
18.5
9.8
38.5
35.7
7.9
1.3
Realization/t (Rs.)
3,088
2,188
41.1
2,896
2,744
2,390
14.8
6.6
EBITDA/t (Rs)
1,706
1,050
62.5
1,202
1,613
1,078
49.7
Net Sa l es
88,288
110,885
109,510
Y/e March
EBITDA
38,443
62,098
58,608
43.5
56.0
53.5
27,361
41,944
38,077
8.6
13.3
12.0
21.0
53.3
RoE (%)
10.0
16.3
13.7
PE (x)
13.6
8.9
9.8
P / BV (x)
1.5
1.4
EV / E (x)
8.6
5.8
Margin (%)
PAT
EPS (Rs )
Growth (%)
(9.2)
Margin (%)
YoY gr. (%)
66.6
Q4
12M
12M
FY17
FY18E
FY17
28,713 110,885 88,288
62,098
YoY gr. (%)
25.6
38,443
61.5
56.0 43.5
1,246 bps
Operating Metrics
July 11, 2017 108
Apr‐Jun 2017 Earnings Preview
Tata Steel Ra ti ng
BUY
Pri ce (Rs )
559
Ta rget Pri ce (Rs )
589
M/Ca p (Rs bn)
542.6
Sha res o/s (m)
970.2
Standalone net revenue (incl. other operating income) is expected to fall 17% QoQ on the back of 14.3% fall in volumes and 3%/Rs1509/t QoQ fall in realisations at Rs129.8bn. Driven by lower QoQ volumes and weak realisations, EBITDA/t is expected to fall by 12.6% QoQ (Rs1,720/t) to Rs11,866. EBITDA is likely to be lower by 25% QoQ as Q4FY17 had the benefit of deferred income under EPCG scheme of Rs32.6bn. PAT is likely to fall by 29.6% QoQ to Rs11.9bn. Key Figures (Rs m) ‐ Consolidated Y/e March
Net Sa l es
FY17
FY18E
Quarterly Table (Rs m) ‐ Standalone FY19E
1,122,994 1,301,114 1,334,293
EBITDA
170,078
197,950
207,617
15.1
15.2
15.6
39,476
60,010
68,573
Margin (%)
PAT
EPS (Rs )
Growth (%)
40.7
61.9
77.7
NA
52.0
25.7
Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
138,285
Q1
FY17
91,205
YoY gr. (%)
51.6
35,957
22,214
61.9
Q4
12M
12M
FY17
FY18E
FY17
156,389 549,190 479,930
YoY gr. (%)
14.4
43,610
141,536
118,760
19.2
26.0
24.4
165 bps
27.9
25.8
24.7
103 bps
Reported PAT
14,096
5,754
145.0
14,150
54,145
34,446
57.2
PAT (Excl. Ex Items )
14,096
6,707
110.2
16,923
54,145
38,888
39.2
2.9
2.1
35.1
3.2
12.3
10.9
12.0
Operating Metrics
RoE (%)
13.1
17.7
17.7
PE (x)
13.7
9.0
7.2
1.7
1.5
1.2
Real. / Tonne (Rs )
47,684
42,500
12.2
49,225
44,827
43,865
2.2
6.0
EBITDA / Tonne (Rs)
12,399
10,351
19.8
13,727
11,553
10,855
6.4
P / BV (x)
EV / E (x)
7.8
6.5
Sales Vol. (m tonnes )
Tata Steel Tata Steel Europe (TSE)’s EBITDA is expected to fall 46.8% QoQ on the back of 12.3% lower volumes and 37.1% decrease in EBITDA/t at US$65 (on the back of fall in spreads). Due to lower earnings in Indian and TSE operations, we expect consolidated EBITDA to fall 36.4% QoQ to Rs44.6bn and consolidated Adj. PAT to fall 63% QoQ to Rs12.2bn. Ra ti ng
BUY
Pri ce (Rs )
559
Ta rget Pri ce (Rs )
589
M/Ca p (Rs bn)
542.6
Sha res o/s (m)
970.2
Y/e March
Key Figures (Rs m) ‐ Consolidated Y/e March
Net Sa l es
FY17
FY18E
FY19E
1,122,994 1,301,114 1,334,293
EBITDA
Margin (%)
PAT
EPS (Rs )
170,078
197,950
207,617
15.1
15.2
15.6
39,476
60,010
68,573
40.7
61.9
77.7
NA
52.0
25.7
RoE (%)
13.1
17.7
17.7
PE (x)
Growth (%)
Quarterly Table (Rs m) – Consolidated Net Sales
EBITDA
Margin (%)
Q1
FY18E
289,115
Q1
FY17
252,298
YoY gr. (%)
14.6
Q4
12M
12M
FY17
FY18E
FY17
338,960 1,301,114 1,122,994
44,660
32,420
37.8
70,252
197,950
170,078
16.4
15.4
12.8
260 bps
20.7
15.2
15.1
7 bps
Reported PAT
12,249
1,486
724.4
(7,251) 60,010
(3,766)
PAT (Excl. Ex Items )
12,249
3,164
287.2
33,435
60,010
39,476
52.0
NA
Operating Metrics
2.5
2.5
(1.2) 2.9 10.3
10.0
3.0
EBITDA/Tn‐Corus (US$ 65.0
SalesVol.‐Corus (mt)
50.6
28.6
68.0
NA
103.3
70.0
13.7
9.0
7.2
P / BV (x)
1.7
1.5
1.2
Sales Vol.‐South East 0.7 0.7 ‐ 0.7 2.7
(mt)
EV / E (x)
7.8
6.5
6.0
EBITDA/Tn‐SEAN (US$) 25.0
YoY gr. (%)
15.9
43.0
2.7 ‐ (41.8) 32.8 30.00 30.0
NA
July 11, 2017 109
Apr‐Jun 2017 Earnings Preview
SAIL Ra ti ng
Reduce
Pri ce (Rs )
63
Ta rget Pri ce (Rs )
50
M/Ca p (Rs bn)
260.2
Sha res o/s (m)
4,130.5
Net revenue is expected to fall by 14.6% QoQ to Rs108.4bn on account of 13% fall in volumes and 2%/Rs750/t fall in realisations. Cost is expected to fall by 2% QoQ/Rs778/t on account of lower coking coal cost. Company’s operating loss/t is expected to narrow to Rs739/t v/s operating loss/t of Rs767 in Q4FY17. Hence, EBITDA loss is expected to narrow to Rs2.2bn v/s loss of Rs.2.6bn in Q4FY17. We expect a net loss of Rs8.8bn for Q1FY18 v/s loss of Rs7.7bn in Q4FY17. Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
FY18E
FY19E
444,524
551,807
623,658
EBITDA
380
31,325
44,775
Margin (%)
0.1
5.7
7.2
PAT
EPS (Rs )
Growth (%)
(26,902)
(14,098)
(14,060)
(6.5)
(3.4)
(3.4)
(33.1) (47.6) (0.3)
RoE (%)
(7.1)
(4.0)
(4.1)
PE (x)
(9.7)
(18.5)
(18.5)
P / BV (x)
0.7
0.7
0.8
EV / E (x)
1,687.0
22.3
16.4
FY17
July 11, 2017 Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
108,380
Q1
FY17
92,381
YoY gr. (%)
17.3
Q4
12M
12M
FY17
FY18E
FY17
126,906 551,807 444,524
(2,217)
2,338
NA
380
NA
(2.0)
2.5
NA
(2.1) 5.7 0.1
NA
(2,644) 31,325
YoY gr. (%)
24.1
Reported PAT
(8,826)
(4,813)
NA
(7,716) (14,098) (28,332)
NA
PAT (Excl. Ex Items)
(8,826)
(4,455)
NA
(7,718) (14,098) (26,902)
NA
3.0
2.8
7.1
3.4
15.0
13.2
14.3
35,627
32,437
9.8
36,377
35,192
32,335
8.8
(739)
835
(767)
2,020
28
Operating Metrics
Sales Vol. (mt)
Real./Tonne (Rs)
EBITDA/Tonne (Rs)
NA
NA
110
Apr‐Jun 2017 Earnings Preview
Avishek Datta [email protected] +91‐22‐6632 2254 Oil & Gas 
Top picks Indian Oil Corporation HPCL Q1FY18 Oil sector earnings are likely to be sequentially lower due to muted performance by the Oil Marketing companies (OMCs), RIL and the upstream companies. Drop in OMCs earnings will result from lower spreads on petrol and diesel and inventory loss due to crude oil price correction. Upstream earnings will hit from lower crude oil and gas price. However, low LNG prices, appreciating INR will support CGD companies and Petronet LNG’s respectively. Oil sector earnings Total (Rs m) Q1FY18E
Q4FY17
% chg Q1FY17
% chg
3,408,354
3,676,333
‐7.3% 3,070,809
11.0%
EBITDA 366,773
307,302
19.4% 449,477
‐18.4%
PAT 205,149
227,959
‐10.0% 267,265
‐23.2%
50
55.0
‐9.1% 45.8
9.2%
64.5
67.0
‐3.7% 66.9
‐3.6%
Sales Brent (USD/bbl) USD/Rs Source: PL Research, Company Data 
RIL: RIL’s earnings are likely to be a tad lower at Rs76.7bn due to drop in refining margins and appreciating INR. We have factored in GRMs of US$11/bbl (US$11.5/bbl in Q4) due to sequential drop in diesel and gasoline spreads partly compensated by higher refining thruput. However, petrochemicals spreads have improved sequentially led by higher PE, PP and PVC spreads. 
Downstream: We expect OMCs to report lower profits of Rs61.6bn for Q1 vis‐à‐
vis Rs73.8bn in Q4 in the absence of inventory gains; For Q1, we have estimated an inventory loss of Rs26bn against gain of Rs37bn. However, OMCs Q4 earnings included one off provisions for wage hikes which will not be repeated in Q1. Also, refining spreads for petrol and diesel are sequentially lower despite benchmark margins flat at US$6.4/bbl in Q4. However, marketing earnings are likely to be supported by higher volumes and stable margins for diesel and petrol. OMC earnings OMC (Rs m) Sales EBITDA PAT Q1FY18E
Q4FY17
% chg Q1FY17
% chg
2,429,899
2,590,385
‐6.2% 2,275,573
6.8%
198,506
188,289
5.4% 292,719
‐32.2%
61,596
73,811
‐16.5% 129,878
‐52.6%
6.4
6.4
0.0% 5.0
28.0%
Singapore GRM (US/bbl) Source: PL Research, Company Data 
July 11, 2017 Upstream: Upstream companies are expected to show higher operating profits despite lower crude oil and gas realisation. This is on the back of one off wage 111
Apr‐Jun 2017 Earnings Preview
ad royalty provisions. Production and sales volumes are likely to be at Q4FY17 levels. We have not factored in upstream subsidy as was evident in FY17. Upstream earnings table UPSTREAM Q1FY18E
Q4FY17
% chg Q1FY17
% chg
Sales 222,539
242,259
‐8.1% 200,059
11.2%
EBITDA 112,407
73,963
52.0% 102,534
9.6%
48,536
55,112
‐11.9% 47,270
2.7%
PAT Source: Company Data, PL Research * Ex drywell write off by ONGC Brent prices have come off sequentially 120.0 110.2 109.4 107.5 109.8 102.1 (US$/bbl)
100.0 76.0 80.0 54 60.0 62 50.2 43.6 40.0 45.9 45.8 49.9 55.0 50.0 34.5 20.0 Q1FY18E
Q4FY17
Q3FY17
Q2FY17
Q1FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
0.0 Source: Bloomberg, PL Research For Q1, OMCs earnings will be impacted by inventory loss from drop in crude oil prices against gains of Rs37bn in Q4. We estimate Q1 inventory loss at Rs26bn. Singapore GRMs have been flat despite lower diesel and petrol spreads 10.0
8.5
(US$/bbl)
8.0
6.0
6.3
5.5
8.0
6.3
5.8
8
7.8
6.7 6.4 6.4
6.3
5.0 5.1
4.8
4.2
4.0
2.0
Q1FY18E
Q4FY17
Q3FY17
Q2FY17
Q1FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
0.0
Source: PL Research, Company Data July 11, 2017 112
Apr‐Jun 2017 Earnings Preview
Marketing gross margins have remained stable Diesel
5
Petrol
(Rs / Litre)
4
3
2
1
16/6/2017
16/5/2017
16/4/2017
16/3/2017
16/2/2017
16/1/2017
17/12/2016
16/11/2016
1/11/2016
1/10/2016
1/9/2016
1/8/2016
1/7/2016
1/6/2016
1/5/2016
5/4/2016
17/3/2016
18/2/2016
16/1/2016
16/12/2015
16/11/2015
1/11/2015
0
Source: PPAC, PL Research, Company Data Oil product volume growth has slowed LPG YoY gr. Gasoline YoY gr.
Jet Fuel
YoY gr.
Kerosene YoY gr. Jan‐16 1,690 4.6% 1,815 11.4%
532
11.3%
560 ‐1.4% Gasoil/
Diesel
6,285
Feb‐16 1,729 14.5% 1,839 12.9%
523
18.2%
560 ‐4.9% 6,405
10.8%
Mar‐16 1,835 14.1% 2,047 21.5%
563
14.0%
566 ‐4.0% 6,784
15.4%
Apr‐16 1,591 7.5% 1,996 11.9%
557
12.7%
516 ‐9.1% 6,768
4.3%
May‐16 1,599 6.8% 2,083 13.6%
571
14.0%
530 ‐8.1% 6,958
8.1%
Jun‐16 1,613 8.7% 1,846 4.4%
553
13.3%
533 ‐5.9% 6,384
1.5%
Jul‐16 1,708 8.4% 1,918 14.7%
559
11.8%
502 ‐12.9% 5,807
1.8%
Aug‐16 1,840 19.1% 2,205 24.9%
555
10.5%
497 ‐13.3% 6,134
13.0%
Sep‐16 1,868 15.7% 1,815 ‐3.4%
574
15.4%
501 ‐11.1% 5,213
‐11.4%
Oct‐16 1,850 9.6% 2,106 13.8%
570
6.7%
380 ‐34.0% 6,675
5.2%
Nov‐16 1,871 15.2% 2,026 14.3%
591
9.7%
387 ‐31.8% 6,750
10.6%
Dec‐16 1,932 7.9% 1,965 7.9%
641
17.1%
399 ‐30.5% 6,560
1.2%
Jan‐17 1,981 17.2% 1,804 ‐0.6%
632
18.8%
366 ‐34.6% 5,800
‐7.7%
Feb‐17 1,808 4.6% 1,896 3.1%
577
10.3%
371 ‐33.8% 6,159
‐3.8%
Mar‐17 1,887 2.8% 2,106 2.9%
640
13.7%
414 ‐26.8% 6,805
0.3%
Apr‐17 1,649 3.6% 2,085 4.5%
609
9.4%
331 ‐35.9% 6,954
2.7%
May‐17 1,784 11.6% 2,402 15.3%
632
10.7%
353 ‐33.4% 7,513
8.0%
('000 tons) YoY gr.
7.9%
Source: Company Data, PL Research July 11, 2017 113
Apr‐Jun 2017 Earnings Preview
Stock Performance Absolute
1M
3M
Relative to Sensex
6M
12M
1M
3M
6M
12M
Bha ra t Petrol eum Corpora ti on
(5.7)
(5.2) 3.2
22.0
(7.2)
(12.4)
(14.7) 5.1
GAIL (Indi a )
(3.6)
(4.6) 11.1
30.4
(5.0)
(11.8)
(6.8) 13.5
Hi ndus ta n Petrol eum Corpora ti on
(5.0)
(5.6) 7.2
49.3
(6.5)
(12.8)
(10.7) 32.4
(7.0) 10.5
Indi a n Oi l Corpora ti on
(8.9)
63.4
(10.3)
(14.2)
(7.5) 46.5
Indra pra s tha Ga s
(2.3) 6.9
15.1
79.8
(3.8)
(0.4)
(2.8) 62.9
Ma ha na ga r Ga s
0.8
9.4
16.4
98.0
(0.7) 2.2
(1.5) 81.1
Oi l & Na tura l Ga s Corpora ti on
(3.8)
(12.7)
(17.7) 9.2
(5.2)
(19.9)
(35.6) (7.7)
Oi l Indi a
(7.9)
(21.3)
(26.5)
(1.8)
(9.4)
(28.6)
(44.4) (18.7)
Petronet LNG
1.5
6.4
21.2
50.3
0.0
(0.8) 3.3
33.3
Rel i a nce Indus tri es
11.8
8.1
37.3
52.3
10.3
0.8
35.4
Q4FY17 QoQ gr. (%)
12MFY18E
19.4
Source: Bloomberg, PL Research Summary Financials ‐ Quarterly (Rs m) Companies
Bha ra t Petrol eum Corpora ti on
GAIL (Indi a )
Hi ndus ta n Petrol eum Corpora ti on
Indi a n Oi l Corpora ti on
Indra pra s tha Ga s
Ma ha na ga r Ga s
Q1FY18E
Q1FY17 YoY gr. (%)
Sa l es
598,677
570,158
5.0
660,232
(9.3) 2,163,529
12MFY17 YoY gr. (%)
2,012,507
7.5
EBITDA
21,132
39,192
(46.1) 22,123
(4.5) 121,415
135,125
(10.1)
Margins (%)
3.5
6.9
(334)bps 3.4
18 bps 5.6
6.7
(110)bps
PAT
13,602
26,205
(48.1) 18,417
(26.1) 77,651
95,070
(18.3)
Sa l es
135,929
108,321
25.5
(0.6) 553,085
481,489
14.9
71,173
64,094
11.0
27 bps 12.9
13.3
(44)bps
42,448
38,016
11.7
1,874,263
19.4
136,741
EBITDA
15,830
15,933
(0.6) 15,553
Margins (%)
11.6
14.7
(306)bps 11.4
PAT
10,020
8,452
18.6
Sa l es
515,830
516,610
(0.2) 587,788
(12.2) 2,238,609
EBITDA
19,931
36,268
(45.0) 28,860
(30.9) 118,179
108,130
9.3
Margins (%)
3.9
7.0
(316)bps 4.9
(105)bps 5.3
5.8
(49)bps
PAT
10,171
20,984
(51.5) 18,188
(44.1) 43,177
82,358
(47.6)
Sa l es
1,144,046
1,072,007
6.7
(6.4) 4,191,891
3,553,101
18.0
339,086
340,132
(0.3)
303 bps 8.1
9.6
(148)bps
2,601
1,222,853
1.8
285.2
EBITDA
75,952
136,835
(44.5) 44,086
Margins (%)
6.6
12.8
(613)bps 3.6
PAT
37,823
82,689
(54.3) 37,206
1.7
203,551
203,854
(0.1)
Sa l es
11,314
9,979
13.4
11,065
2.3
46,310
38,148
21.4
EBITDA
2,668
2,596
2.7
2,122
25.7
11,252
9,638
16.8
Margins (%)
23.6
26.0
440 bps 24.3
25.3
(97)bps
PAT
1,708
1,480
15.4
1,353
26.2
7,121
5,711
24.7
Sa l es
5,681
5,341
6.4
5,764
(1.4) 23,824
20,445
16.5
11.5
1,631
4.1
6,822
6,421
6.2
160 bps 28.6
31.4
(277)bps
4,024
12.6 EBITDA
1,699
1,524
Margins (%)
29.9
28.5
PAT
1,058
927
(244)bps 19.2
138 bps 28.3
14.1
995
72.3
6.3
4,530
Source: Company Data, PL Research July 11, 2017 114
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
Oi l & Na tura l Ga s Corpora ti on
Oi l Indi a
Petronet LNG
Rel i a nce Indus tri es
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
Sa l es
199,587
177,848
12.2
217,140
(8.1) 1,617,343
1,421,490
13.8
EBITDA
105,616
93,905
12.5
94,301
12.0
583,692
470,565
24.0
Margins (%)
52.9
52.8
949 bps 36.1
33.1
299 bps
PAT
44,857
42,325
6.0
70,451
(36.3) 244,228
208,873
16.9
Sa l es
22,951
22,212
3.3
25,119
(8.6) 110,097
95,104
15.8
EBITDA
6,790
8,629
(21.3) 6,712
1.2
33,901
33,757
0.4
Margins (%)
29.6
38.8
(926)bps 26.7
287 bps 30.8
35.5
(470)bps
PAT
3,678
4,944
(25.6) 12,519
(70.6) 21,166
15,487
36.7
Sa l es
64,112
53,373
20.1
63,651
0.7
290,567
246,160
18.0
EBITDA
6,684
6,425
4.0
6,164
8.4
29,893
25,924
15.3
Margins (%)
10.4
12.0
74 bps 10.3
10.5
(24)bps
PAT
4,412
3,779
16.8
4,708
(6.3) 19,787
17,058
16.0
Sa l es
654,506
534,960
22.3
745,980
(12.3) 3,078,154
2,420,250
27.2
EBITDA
108,834
108,170
0.6
112,800
(3.5) 493,785
432,560
14.2
151 bps 16.0
17.9
(183)bps
(6.1) 337,928
314,250
7.5 Margins (%)
16.6
20.2
PAT
76,576
75,480
12 bps 43.4
(161)bps 9.7
(359)bps 15.1
1.5
81,510
Source: Company Data, PL Research Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) 2017
Net Sales
2018E
Apr‐Jun'17
2019E
Jan‐Mar'17 QoQ gr. (%)
Net Sa l es
3,352,633
3,070,809
9.2
3,676,333
(8.8)
10.6
EBITDA
365,135
449,477
(18.8) 334,352
9.2
1,809,197
1,974,980
Margin (%)
10.9
14.6
203,905
267,265
12,162,956
14,313,410
15,824,747
Growth (%)
3.5
17.7
EBITDA
1,626,345
Margin (%)
13.4
12.6
12.5
PAT (Excl . Ex Items )
PAT
984,700
1,001,586
1,086,691
Growth (%)
20.7
1.7
8.5
11.7
11.5
10.6
PE (x)
Apr‐Jun'16 YoY gr. (%)
(375)bps
9.1
180 bps
(23.7) 247,949
(17.8)
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. July 11, 2017 115
Apr‐Jun 2017 Earnings Preview
BPCL Ra ti ng
BUY
Pri ce (Rs )
663
Ta rget Pri ce (Rs )
BPCL is expected to report sequntial drop in profits, given lower refining profits and inventory losses. However, marketing volumes will recover from Q4 lows, while stable margins will support earnings. We have factored in US$5.0/bbl for Q1 (US$6/bbl in Q4). We expect refinery thruput of 6.4MTPA, up from 6MTPA in Q4. 806
M/Ca p (Rs bn)
958.9
Sha res o/s (m)
1,446.2
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
FY17
FY18E
FY19E
2,012,507 2,163,529 2,527,487
EBITDA
135,125
121,415
139,812
6.7
5.6
5.5
95,070
77,651
91,294
Margin (%)
PAT
EPS (Rs )
Growth (%)
65.7
17.5
RoE (%)
30.8
PE (x)
53.7
63.1
(18.3) 17.6
21.5
Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
598,677
Q1
FY17
570,158
YoY gr. (%)
5.0
Q4
12M
12M
FY17
FY18E
FY17
660,232 2,163,529 2,012,507
YoY gr. (%)
7.5
21,132
39,192
(46.1)
22,123
121,415
135,125
(10.1)
3.5
6.9
(334)bps
3.4
5.6
6.7
(110)bps
Reported PAT
13,602
26,205
(48.1)
18,417
77,651
95,070
(18.3)
PAT (Excl. Ex Items)
13,602
26,205
(48.1)
18,417
77,651
95,070
(18.3)
Operating Metrics
22.1
Crude /bbl
50.0
45.8
9.2
55.0
55.0
49.0
12.2
US$/Rs
64.5
66.9
(3.6)
67.0
66.0
67.1
(1.6)
GRM (US$/bbl)
5.1
6.1
(13.5)
6.0
6.0
5.3
14.1
Refining Vol. (MTPA)
6.4
6.2
2.6
6.0
29.4
25.4
15.8
10.1
12.3
10.5
P / BV (x)
2.9
2.5
2.2
EV / E (x)
8.2
9.4
8.5
Gail (India) GAIL is likely to report steady performance in Q1 despite lower PE (lower volumes) and LPG earnings (price correction) in the absence of one‐off charges in Q4. However, PE spreads are likely to be higher sequentially. We also expect gas transmission volume to be healthy at 105mmscmd (102mmscmd in Q4 due to soft spot LNG prices). Ra ti ng
BUY
Pri ce (Rs )
367
Ta rget Pri ce (Rs )
429
M/Ca p (Rs bn)
621.0
Sha res o/s (m)
1,690.9
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY17
FY18E
FY19E
481,489
553,085
624,098
64,094
71,173
77,629
13.3
12.9
12.4
38,016
42,448
46,986
30.0
25.1
27.8
70.8
(16.2) 10.7
RoE (%)
12.0
12.4
12.7
PE (x)
12.3
14.6
13.2
1.4
1.7
1.6
P / BV (x)
EV / E (x)
9.8
8.7
8.0
Y/e March
Net Sales
EBITDA
Margin (%)
Q1
Q1 YoY gr. FY18E
FY17
(%)
135,929 108,321 25
Q4
FY17
136,741
15,830
15,933
(1)
15,553
11.6
15
(306)
11.4
12M
12M
FY18E
FY17
553,085 481,489
71,173
YoY gr. (%)
14.9
64,094
11.0
12.9 13
(44)bps
Reported PAT
10,020
8,452 19
10,482
42,448
38,016
11.7
PAT (Excl. Ex Items)
10,020
8,452 19
2,601
42,448
38,016
11.7
101.5
106
101
4.7
16.7
Operating Metrics
Gas trans. (mms cmd) 105
96
8.9
Petrochem sales (tpa) 150
110
36.4
186.0
700
600
Gas sales (mmscmd)
79
6.2
82.5
73
72
84
2.0 July 11, 2017 116
Apr‐Jun 2017 Earnings Preview
HPCL Ra ti ng
BUY
Pri ce (Rs )
512
Ta rget Pri ce (Rs )
HPCL is expected to report lower profits sequentially due to drop in refining profits. We have factored in GRMs of US$6/bbl for Q1 (US$8/bbl in Q4) and refinery thruput of 4.6MTPA, flat sequentially. 577
M/Ca p (Rs bn)
521.1
Sha res o/s (m)
1,017.0
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
FY17
FY19E
1,874,263 2,238,609 2,465,981
EBITDA
108,130
Margin (%)
PAT
118,179
122,852
5.8
5.3
5.0
82,358
43,177
48,864
81.0
42.5
48.0
EPS (Rs )
Growth (%)
FY18E
76.2
RoE (%)
PE (x)
(47.6) 13.2
Q1
FY18E
Y/e March
Net Sales
Q1
FY17
YoY gr. (%)
12M
FY18E
12M
FY17
516,610
19,931
36,268
(45.0)
28,860
118,179
108,130
9.3
3.9
7.0
(316)bps
4.9
5.3
5.8
(49)bps
Reported PAT
10,171
20,984
(51.5)
18,188
43,177
82,358
(47.6)
PAT (Excl. Ex Items)
10,171
20,984
(51.5)
18,188
43,177
82,358
(47.6)
9.2
55.0
55.0
49.0
12.2
Margin (%)
587,788 2,238,609 1,874,263
YoY gr. (%)
515,830
EBITDA
(0.2)
Q4
FY17
19.4
Operating Metrics
40.7
17.0
16.2
Crude /bbl
50.0
45.8
6.3
12.1
10.7
US$/Rs
P / BV (x)
2.3
1.9
1.6
GRM (US$/bbl)
EV / E (x)
7.2
6.8
6.7
Refining Vol. (MTPA)
64.5
66.9
(3.6)
67.0
66.0
67.1
(1.6)
6.0
6.8
(12.2)
8.0
5.5
6.2
(11.3)
4.6
4.5
2.7
4.6
17.8
17.8
(0.1)
Indian Oil Corporation Unlike other OMCs, IOC has stable earnings in Q1. For Q4, IOCL earnings were hit by wage and entry tax provisions of Rs66bn which will not be there in Q1. For the quarter, we have factored in GRMs of US$5.0/bbl (US$8.9/bbl in Q4 including inventory gains of US$2.1/bbl). Refinery thruput is expected to be at 17.7MTPA for Q1 against 17.1MTPA in Q4. Ra ti ng
BUY
Pri ce (Rs )
383
Ta rget Pri ce (Rs )
514
M/Ca p (Rs bn)
1,857.9
Sha res o/s (m)
4,855.9
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
FY17
FY18E
FY19E
3,553,101 4,191,891 4,637,548
340,132
339,086
358,170
9.6
8.1
7.7
203,854
203,551
212,103
42.0
41.9
43.7
12.0
(0.1) 4.2
25.2
22.3
20.5
PE (x)
9.1
9.1
8.8
P / BV (x)
2.2
1.9
1.7
EV / E (x)
6.3
6.4
6.1
July 11, 2017 Y/e March
Net Sales
EBITDA
Q1
Q1
FY18E
FY17
1,144,046 1,072,007
YoY gr. Q4
12M
12M
(%)
FY17
FY18E
FY17
6.7 1,222,853 4,191,891 3,553,101
75,952
136,835
(44.5)
44,086
6.6
12.8
(613)bps
3.6
Reported PAT
37,823
82,689
(54.3)
37,206
203,551
203,854
(0.1)
PAT (Excl. Ex Items)
37,823
82,689
(54.3)
37,206
203,551
203,854
(0.1)
Crude /bbl
50.0
45.8
9.2
55.0
55.0
49.0
12.2
US$/Rs
64.5
66.9
(3.6)
67.0
66.0
67.1
(1.6)
5.0
10.0
(49.9)
9.0
6.4
7.8
(17.6)
Margin (%)
339,086
340,132
YoY gr. (%)
18.0
(0.3)
8.1 9.6 (148)bps
Operating Metrics
GRM (US$/bbl)
117
Apr‐Jun 2017 Earnings Preview
Indraprastha Gas Ra ti ng
BUY
Pri ce (Rs )
1,074
Ta rget Pri ce (Rs )
1,149
M/Ca p (Rs bn)
150.3
Sha res o/s (m)
140.0
IGL is expected to report a strong quarter in Q1. We expect CNG volumes to grow at 10% YoY, while PNG is expected to grow at 12%. We expect IGL’s spreads to improve from Q4 levels as it included one‐off wage and lease rental provisions. Also, appreciating INR rate, cheap domestic gas prices will support earnings even as higher operating costs from new CNG stations will be a drag. Quarterly Table (Rs m) Y/e March
FY17
Net Sa l es
38,148
EBITDA
PAT
46,310
FY19E
Q1
FY17
9,979
2,668
2,596
2.7
2,122
11,252
9,638
16.8
23.6
26.0
(244)bps
19.2
24.3
25.3
(97)bps
Reported PAT
1,708
1,480
15.4
1,353
7,121
5,711
24.7
PAT (Excl. Ex Items)
1,708
1,480
15.4
1,353
7,121
5,711
24.7
Net Sales
51,235
EBITDA
Margin (%)
11,252
12,247
25.3
24.3
23.9
YoY gr. (%)
13.4
Q4
FY17
11,065
12M
FY18E
46,310
12M
FY17
38,148
YoY gr. (%)
21.4
5,711
7,121
8,055
40.8
50.9
57.5
36.3
24.7
13.1
Ttl. Sales Vol. (mscm)
436
395
10.4
433
1,799
1,621
11.0
332
302
10.0
325
1,344
1,222
10.0
104
93
12.0
108
455
399
14.0
EPS (Rs )
Growth (%)
FY18E
9,638
Margin (%)
Q1
FY18E
11,314
Y/e March
Key Figures (Rs m) Operating Metrics
RoE (%)
21.7
22.8
21.7
CNG sales Vol. (mscm
PE (x)
26.3
21.1
18.7
PNG sales Vol. (mscm
5.3
4.4
3.7
CNG retail Pr. (Rs/kg)
36.2
35.7
1.3
36.2
36.4
36.4
0.0
10.4
PNG retail Pr. (Rs/scm
23.8
21.7
9.6
23.8
31.8
30.8
3.3 P / BV (x)
EV / E (x)
14.6
11.9
Mahanagar Gas Ra ti ng
BUY
Pri ce (Rs )
982
Ta rget Pri ce (Rs )
MGL is expected to report healthy quarter in Q4 as soft spot LNG prices and appreciating INR will support earnings. Also, CNG demand is likely to recover from Q4 levels which was impacted by demonetisation. We expect EBITDA/scm spreads of Rs7.2/scm in Q1 against Rs6.9/scm in Q4. 980
M/Ca p (Rs bn)
97.0
Sha res o/s (m)
98.8
Quarterly Table (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
Net Sales
Q1
Q1
FY18E
FY17
5,681 5,341
EBITDA
1,699
1,524
11.5
1,631
Y/e March
Key Figures (Rs m) FY17
FY18E
FY19E
20,445
23,824
25,905
6,421
6,822
7,322
Margin (%)
YoY gr. (%)
6.4
Q4
FY17
5,764
12M
12M
FY18E
FY17
23,824 20,445
6,822
6,421
YoY gr. (%)
16.5
6.2
29.9
29
138 bps
28.3
Reported PAT
1,058
927
14.1
995
28.6 31 (277)bps
4,530
4,024
12.6
PAT (Excl. Ex Items)
1,058
927
14.1
995
4,530
4,024
12.6
Ttl. Sales Vol.(mscm) 236.4
227
4.0
235.9
1,005.2
940
6.9
31.4
28.6
28.3
4,024
4,530
4,861
40.7
45.9
49.2
17.9
12.6
7.3
24.3
23.4
21.7
CNG sales Vol.(mscm) 175.9
169
4.0
173.3
745.2
696
7.0
58
3.9
62.6
260.0
244
6.7
Operating Metrics
24.1
21.4
20.0
PNG sales Vol.(mscm) 60.4
P / BV (x)
5.4
4.7
4.0
CNG retail Pr. (Rs/kg) 27.8
27
1.6
27.8
29.0
27
8.4
EV / E (x)
14.6
13.4
12.2
PNG retail Pr. (Rs/scm 25.0
23
8.5
25.8
28.5
26
10.5 PE (x)
July 11, 2017 118
Apr‐Jun 2017 Earnings Preview
ONGC Ra ti ng
ACCUMULATE
Pri ce (Rs )
163
Ta rget Pri ce (Rs )
217
M/Ca p (Rs bn)
2,089.3
Sha res o/s (m)
12,833.3
Net Sa l es
FY17
FY18E
FY19E
1,421,490 1,617,343 1,810,428
EBITDA
470,565
Margin (%)
662,094
33.1
36.1
36.6
244,228
281,382
16.3
19.0
21.9
(18.3) 16.9
15.2
EPS (Rs )
Growth (%)
583,692
208,873
PAT
Quarterly Table (Rs m) Net Sales
Q1
FY18E
199,587
Q1
FY17
177,848
YoY gr. (%)
12.2
EBITDA
105,616
93,905
12.5
94,301
52.9
52.8
12 bps
43.4
Y/e March
Key Figures (Rs m) Y/e March
ONGC earnings are likely to improve sequentially as Q4 had one‐off wage and royalty provisions of Rs45bn. However, operational earnings will be impacted by lower crude oil prices and appreciating exchange rate. We have left crude oil and gas volumes unchanged and have not factored in any subsidy burden for ONGC, in line with FY17 trend. RoE (%)
10.9
11.8
12.5
PE (x)
10.0
8.6
7.4
Margin (%)
Q4
12M
12M
FY17
FY18E
FY17
217,140 1,617,343 1,421,490
583,692
YoY gr. (%)
13.8
470,565
24.0
36.1 33.1
299 bps
Reported PAT
44,857
42,325
6.0
70,451
244,228
208,873
16.9
PAT (Excl. Ex Items)
44,857
42,325
6.0
70,451
244,228
208,873
16.9
0.0
54.9
55.0
50.0
10.0
0.0
66.0
66.5
NA
0.0
#DIV/0!
Operating Metrics
51.2
51.2
Subsidy (US$/bbl)
Gros s Real . (US$/bbl)
0.0
0.0
Gas Prod. (bcm)
6.1
6.1
0.0
5.9
0.0
64.5
64.5
0.0
67.0
0.0
0.0
#DIV/0!
0
0
0
0.0
0.0
NA
P / BV (x)
1.1
1.0
0.9
US$/Rs
EV / E (x)
4.9
3.8
3.2
Subsidy (Rs m)
NA
NA
Oil India We expect OINL profits to come off sequentially due to lower crude oil and gas realisation and appreciating exchange rate. Also, OINL’s Q4 earnings had support from higher other income, tax write‐back partly impacted by higher wage provisions. Crude oil and gas sales volumes are expected to be largely flat at 0.83MTPA and 615mscm, respectively. We have not assumed any subsidy burden on OINL, in line with FY17 trend. Ra ti ng
Accumulate
Pri ce (Rs )
266
Ta rget Pri ce (Rs )
303
M/Ca p (Rs bn)
212.9
Sha res o/s (m)
801.3
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
P / BV (x)
EV / E (x)
July 11, 2017 Y/e March
FY17
95,104
33,757
35.5
FY18E
110,097
33,901
30.8
FY19E
120,354
37,771
31.4
15,487
21,166
24,300
19.3
26.4
30.3
(49.5) 36.7
14.8
6.8
8.9
9.8
13.7
10.1
8.8
0.9
0.9
0.8
5.4
5.6
4.5
Net Sales
EBITDA
Margin (%)
Q1
FY18E
22,951
Q1
FY17
22,212
YoY gr. (%)
3.3
Q4
FY17
25,119
12M
FY18E
110,097
12M
FY17
95,104
YoY gr. (%)
15.8
6,790
8,629
(21.3)
6,712
33,901
33,757
0.4
(470)bps
29.6
38.8
(926)bps
26.7
30.8
35.5
Reported PAT
3,678
4,944
(25.6)
12,519
21,166
27,004
(21.6)
PAT (Excl. Ex Items)
3,678
4,944
(25.6)
12,519
21,166
15,487
36.7
50.0
43.1
16.0
52.2
55.0
50.0
10.0
0.0
0.0
0.0
66.0
66.5
(0.8)
Net Real. (US$/bbl)
50.0
43.1
16.0
52.2
23.0
22.7
1.0
Oil Prod. (mn tons)
0.8
0.8
3.4
0.0
18.8
18.4
1.9
Operating Metrics
Gros s Real . (US$/bbl)
Subsidy (US$/bbl)
NA
119
Apr‐Jun 2017 Earnings Preview
Petronet LNG Ra ti ng
BUY
Pri ce (Rs )
Petronet LNG is expected to report strong quarter in Q1 led by 1) higher spot volumes, given soft LNG prices and 2) healthy regas margins. We have factored in regas volume of 192tbtu in Q1 (180 in Q4). 220
Ta rget Pri ce (Rs )
255
M/Ca p (Rs bn)
164.8
Sha res o/s (m)
750.0
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
Net Sa l es
246,160
EBITDA
290,567
FY19E
337,503
Q1
FY18E
Y/e March
Net Sa les
12M
FY17
YoY gr. (%)
20.1
63,651
290,567
246,160
18.0
4.0
6,164
29,893
25,924
15.3
10.4
12.0
(161)bps
9.7
10.3
10.5
(24)bps
Reported PAT
4,412
3,779
16.8
4,708
19,787
17,058
16.0
PAT (Excl. Ex Items)
4,412
3,779
16.8
4,708
19,787
17,058
16.0
105
(0.3)
107
15
13
13.5
70
1
1
(28.6)
44.7 45.2
43.1
10.3
10.4
17,058
19,787
24,688
22.7
26.4
32.9
86.8
16.0
24.8
24.2
23.2
23.9
9.7
8.3
6.7
Cont. Vol. (MTPA)
105
PE (x)
12M
FY18E
6,425
10.5
RoE (%)
Q4
FY17
53,373
35,039
EPS (Rs )
YoY gr. (%)
6,684
29,893
PAT
Q1
FY17
64,112
EBITDA
25,924
Margin (%)
Growth (%)
FY18E
Margin (%)
Operating Metrics
Dahej
P / BV (x)
2.1
1.8
1.5
Spot Vol. (MTPA)
82
60
36.8
EV / E (x)
6.0
4.7
3.4
Contract Tarf.(Rs /tbtu) 46.9
42.6
10.3
5.0 Reliance Industries Ra ti ng
Accumulate
Pri ce (Rs )
1,492
Ta rget Pri ce (Rs )
RIL’s earnings are likely to be lower at Rs76.6bn due to drop in refining earnings and appreciating exchange rate. We have factored in GRMs of US$11/bbl (US$11.5/bbl in Q4) due to sequential drop in diesel and petrol spreads. However, petrochemicals spreads are likely to be strong for PE, PP and PVC spreads. 1,376
M/Ca p (Rs bn)
4,852.0
Sha res o/s (m)
3,251.0
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
FY17
FY18E
FY19E
2,420,250 3,078,154 3,224,208
EBITDA
Margin (%)
PAT
EPS (Rs )
432,560
493,785
522,045
17.9
16.0
16.2
314,250
337,928
344,157
Net Sa les
Q1
FY18E
654,506
Q1
FY17
534,960
EBITDA
108,834
108,170
0.6
112,800
16.6
20.2
(359)bps
15.1
Y/e March
Margin (%)
75,480
1.5
81,510
337,928
314,250
7.5
1.5
81,510
337,928
314,250
7.5
55.0 55.0 48.9
12.5
(4.3) 11.5 10.9 10.7
1.8
1.8
RoE (%)
11.6
11.4
11.1
Brent (US$/bbl)
50.0 45.8
PE (x)
15.4
14.4
14.1
GRM(US$/bbl)
11.0 11.5
1.7
1.6
1.5
11.2
16.0 17.9 (183)bps
75,480
7.5
11.9
14.2
76,576
14.4
13.5
432,560
76,576
105.9
EV / E (x)
493,785
YoY gr. (%)
27.2
PAT (Excl. Ex Items)
103.9
P / BV (x)
Q4
12M
12M
FY17
FY18E
FY17
745,980 3,078,154 2,420,250
Reported PAT
96.7
Growth (%)
YoY gr. (%)
22.3
Operating Metrics
Ref. thruput (MTPA)
17.5 16.8
US$/Rs
64.5 66.9
9.2
4.3
17.5 69.0 69.0
(3.6) 67.0 66.0 67.1
0.0
(1.6) July 11, 2017 120
Apr‐Jun 2017 Earnings Preview
Surajit Pal [email protected] +91‐22‐6632 2259 Top picks Aurobindo Pharma Thyrocare Technologies Glenmark Pharma Pharmaceuticals With only major approvals in gRenvela and gEpzicom in US generics, stable currency values in emerging markets (except Venezuelan Bolivar) and minor appreciation of INR v/s USD QoQ, we expect tepid growth in exports. Russian Rouble, however, marginally appreciated by 1.2% QoQ in Q1FY18 due to stable pricing scenario in crude oil. Marginal depreciation of USD will not have a palpable impact on US revenues for leading Indian Pharma companies such as Dr Reddy’s (DRL), Lupin, Glenmark and Sun Pharma in Q1FY18, while secondary market growth in Russia due to stable Rouble will benefit DRL, Glenmark and Sun Pharma as revenues from Russia contributes 9%, 14% and 7%, respectively for these companies. While Venezuelan Bolivar’s SIMADI rate depreciated by 5.3% (709.39VEF/USD) QoQ, Dr Reddy’s Lab and Glenmark now have zero exports to Venezuela. Glenmark has fully provisioned for cash and receivables in Venezuela in Q4FY17. This will result in translation impact though there is lesser probability of real loss as the subsidiary manufactures those products in local market through CMOs. DRL had provisioned its receivables from Venezuela in Q4FY16. Emerging market currencies v/s USD in Q1FY18 v/s Q4FY17 USDINR Curncy
MXNINR Curncy
VEFINR Curncy
JPYINR Curncy
GBPINR Curncy
RUBINR Curncy
VEBINR Curncy
EURINR Curncy
BRLINR Curncy
ZARINR Curncy
AUDINR Curncy
100.00 80.00 60.00 40.00 20.00 Jun/17
May/17
Apr/17
Mar/17
Feb/17
Jan/17
‐
Source: Bloomberg, PL Research US is a major destination of Pharma exports, contributing 35% (down from 36% in Q4FY17) of revenues in our coverage universe. South‐African ZAR depreciated v/s INR by 3.5% QoQ, which implies stable sales in EM sales except some country‐
specific reasons. Depreciating South Africa ZAR will impact sales for Lupin and Cipla from that geography. July 11, 2017 121
Apr‐Jun 2017 Earnings Preview
Contribution of US generics in Revenues in Q1FY18E Companies US rev (%)
Aurobindo 44.8
Cipla 17.0
Dr Reddy's 44.9
Glenmark 45.0
Indoco Remedies 7.5
Jubilant Life Lupin 38.0
42.0
Sun Pharma 35.0
Zydus Cadila 40.1
Average 34.9
Source: Company Data, PL Research While there were improvements in the flow of new approvals for Indian peers in US generics, there was no large/major product(s) with limited competition opportunity in US generics except gRenvela and gStrattera in Q1FY18E. Hence, we expect to see marginal declining trend in US revenues in Q1FY18. There were approvals for 76 ANDAs given to Indian companies in Q1FY18 vis‐a‐vis 54 ANDAs in Q4FY17, though key approvals were far and few. With approvals of 16 and 15 ANDAs to Aurobindo and Zydus Cadila, respectively, both the companies together shared 41% of all ANDA approvals given to Indian pharma in Q1FY18. Among key launches, Glenmark added three key drugs (Benicar, Tricor, Strattera). Sun Pharma and Aurobindo have disappointed with delay in launching gGlumetza and gNexium in Q4FY17 despite prior approval in the two drugs. Among the key approvals: Glenmark received Strattera, Tricor, and Aurobindo received gStrattera and gRenvela. We believe that approval of gVidaza to Natco and Shilpa Medicare will continue to offer challenging scenario for DRL in US generics as the drug is one of the two largest contributors of revenue for the company in US. Shilpa has launched the product with marketing partners. We expect DRL’s key contributors in US generics, gDacogen, gVidaza and gImitrex auto injector to have strong competition in FY18E post Hospital procurement season in H2FY17. In ROW exports, we expect Indian companies to go easy in troubled markets preferring lower sales growth and shorter working capital cycle as part of their risk mitigation process. Hence, we expect lower sales growth in Latam (except Cadila), especially in Mexico, Venezuela and Colombia. Sales growth in Brazil has been laggard for Zydus Cadila, Glenmark and Dr Reddy’s due to inconsistent regulatory process for approval of generic drugs. July 11, 2017 122
Apr‐Jun 2017 Earnings Preview
Movement of major ROW currencies in FY17 Foreign Exchange Rates vis‐à‐vis INR Q4FY17 (Avg) Q1FY18 (Avg)
Growth (%)
Euro 71.36 70.88
(0.7)
GB Pound Sterling 82.93 82.41
(0.6)
Japanese Yen 0.59 0.58
(1.5)
Russian Rouble 1.14 1.13
(1.2)
South African Zar 5.06 4.89
(3.5)
Brazilian Real 21.31 20.07
(5.8)
USD 67.01 64.46
(3.8)
3.3 3.48
5.2
Mexican Peso Source: Company Data, PL Research With festive season and lower offtake before GST implementations, we expect domestic sales growth (YoY) to be impacted in Q1FY18E. We expect domestic formulation market to continue to be challenging especially for the companies which are highly dependent on acute therapy drugs. Traditionally, sales performances of the acute therapy drugs are lower in second half of fiscal year. It would be more challenging for large Indian Pharma companies due to large base and strong restriction on churning out of new combination drugs. We expect 6‐8% growth in domestic sales of our coverage universe in Q1FY18E, considering ongoing addition of drugs in NLEM list and lack of clarity in selling of combination drugs which reduced offtake from the distributors. While non‐NLEM drugs contribute 82% of market value of domestic formulations, the channel destocking also impacted offtake of NLEM and non‐NLEM drugs across chronic and acute therapy drugs. US FDA: Key approvals for Indian companies in Jan‐Mar 2017 Date Molecule Brand Company 3‐Apr‐17 Tazarotene Tazorac / Avage Sun Pharma (Taro) 4‐Apr‐17 Celecoxib Celebrex Jubilant Generics 5‐Apr‐17 Flouxetine Hydrochloride Flouxetine Hydrochloride Alembic Pharms Ltd 6‐Apr‐17 Bupropion hcl Wellbutrin XL Lupin Ltd 7‐Apr‐17 Dutasteride Avodart Marksans Pharma 7‐Apr‐17 Fenofibrate (Micronized) Fenofibrate (Micronized) Glenmark Pharms Ltd 7‐Apr‐17 Simpesse Seasonique Aurobindo Pharma 12‐Apr‐17 Rocuronium Bromide Rocuronium Bromide Aurobindo Pharma 13‐Apr‐17 Piroxicam Feldene Unichem Labs 18‐Apr‐17 Etomidate Amidate Gland Pharma 20‐Apr‐17 Felbamate Felbatol Sun Pharma (Taro) 24‐Apr‐17 Olmesartan Medoxomil Benicar Torrent Pharms Ltd 24‐Apr‐17 Benicar Alembic Pharms Ltd Benicar HCT Alembic Pharms Ltd 24‐Apr‐17 Olmesartan Medoxomil Olmesartan Medoxomil and Hydrochlorothiazide Olmesartan Medoxomil Benicar Aurobindo Pharma 24‐Apr‐17 Olmesartan Medoxomil Benicar Macleods Pharms Ltd 24‐Apr‐17 Olmesartan Medoxomil Benicar Zydus Pharms USA INC Apr‐17 24‐Apr‐17 July 11, 2017 123
Apr‐Jun 2017 Earnings Preview
Date Brand Company Benicar HCT Aurobindo Pharma 24‐Apr‐17 Molecule Olmesartan Medoxomil and Hydrochlorothiazide Olmesartan Medoxomil Benicar Jubilant Generics 24‐Apr‐17 Olmesartan Medoxomil Benicar Alkem Labs 25‐Apr‐17 Cholestyramine Prevalite Zydus Pharms USA INC 26‐Apr‐17 Ezetimibe & Simvastatin Vytorin Dr Reddys Labs Intl 27‐Apr‐17 Olmesartan Medoxomil Benicar Lupin 28‐Apr‐17 Lo Simpesse Lo Simpesse Aurobindo Pharma Ultracet Macleods Pharms Ltd Benicar HCT Torrent Pharms Ltd 4‐May‐17 Tramadol hcl and Acetaminophen Olmesartan Medoxomil and Hydrochlorothiazide Budesonide Entocort EC Zydus Pharms USA INC 5‐May‐17 Lamivudine & Zidovudine Combivir Aurobindo Pharma 5‐May‐17 Verapamil Hcl Calan SR Cadila Pharms Ltd 12‐May‐17 Haloperidol Decanoate Haldol Gland Pharma 12‐May‐17 Glipizide Glucotrol XL Aurobindo Pharma 12‐May‐17 Fenofibric Acid Trilipix Alembic Pharms Ltd 15‐May‐17 Amlodipine and Olmesartan Medoxomil Azor Aurobindo Pharma 15‐May‐17 Amlodipine and Olmesartan Medoxomil Azor Jubilant Generics 15‐May‐17 Doxorubicin Hcl (Liposomal) Doxil (Liposomal) Dr Reddys Labs Ltd 17‐May‐17 Quetiapine Fumarate Seroquel XR Lupin 17‐May‐17 Kalliga 19‐May‐17 Cyproheptadine Hcl Cyproheptadine Hcl Zydus Pharms USA INC 22‐May‐17 Argatroban in Sodium Chloride Argatroban in Sodium Chloride (Sandoz) Gland Pharma 23‐May‐17 Memantine hcl Namenda Strides Pharma 23‐May‐17 Oxaliplatin Oxaliplatin Gland Pharma 24‐May‐17 Betamethasone Valerate Luxiq Sun Pharma (Taro) 25‐May‐17 Olmesartan Medoxomil Benicar Glenmark Pharms Ltd 25‐May‐17 Nebivolol hcl Nebivolol hcl Glenmark Pharms Ltd 26‐May‐17 Bivalirudin Angiomax Dr Reddys Labs Ltd 26‐May‐17 Acamprosate Calcium Acamprosate Calcium Zydus Pharms USA INC 30‐May‐17 Atomoxetine Hcl Strattera Aurobindo Pharma 30‐May‐17 Atomoxetine Hcl Strattera Glenmark Pharms Ltd 30‐May‐17 Olanzapine Zyprexa Zydis Ajanta Pharma 30‐May‐17 Ibuprofen 30‐May‐17 Felbamate Felbatol Zydus Pharms USA INC 1‐Jun‐17 Mirtazapine Remeron Soltab Zydus Pharms USA INC 1‐Jun‐17 Levofloxacin Levaquin Zydus Pharms USA INC 5‐Jun‐17 Mesalamine Lialda Zydus Pharms USA INC 5‐Jun‐17 Entacapone Comtan Macleods Pharms Ltd 7‐Jun‐17 Amantadine Hcl Amantadine Hcl Strides Pharma 8‐Jun‐17 Diltiazem Hcl Cardizem CD Sun Pharms Inds Ltd 24‐Apr‐17 May‐17 2‐May‐17 3‐May‐17 Aurobindo Pharma Strides Pharma Jun‐17 July 11, 2017 124
Apr‐Jun 2017 Earnings Preview
Date Molecule Brand Company 9‐Jun‐17 Pseudoephedrine Hcl Sudafed 12 Hr Aurobindo Pharma 10‐Jun‐17 Ezetimibe Zetia Zydus Pharms USA INC 12‐Jun‐17 Itraconazole Sporanox Alkem Labs 13‐Jun‐17 Acyclovir Sodium Acyclovir Sodium Zydus Pharms USA INC 13‐Jun‐17 Sevelamer Carbonate Renvela Aurobindo Pharma 15‐Jun‐17 Aurovela 24 FE Loestrin 24 FE Aurobindo Pharma 15‐Jun‐17 Aurovela FE 1.5/30 Loestrin FE 1.5/30 Aurobindo Pharma 16‐Jun‐17 Diflunisal Diflunisal Zydus Pharms USA INC 16‐Jun‐17 Felbamate Felbatol Sun Pharma (Taro) 16‐Jun‐17 Eletriptan Hydrobromide Relpax Zydus Pharms USA INC 16‐Jun‐17 Aurovela FE 1/20 Loestrin FE 1/20 Aurobindo Pharma 16‐Jun‐17 Aurovela 1/20 Loestrin 1/20 Aurobindo Pharma 21‐Jun‐17 Amantadine Hcl Amantadine Hcl Alembic Pharms Ltd 22‐Jun‐17 Indomethacin Indomethacin Glenmark Pharms Ltd 23‐Jun‐17 Entecavir Baraclude Zydus Pharms USA INC 23‐Jun‐17 Azacitidine Vidaza Natco Pharma Ltd 23‐Jun‐17 Ibuprofen Ibuprofen Sun Pharma (Taro) 26‐Jun‐17 Oxybutynin Chloride Ditropan XL Zydus Pharms USA INC 27‐Jun‐17 Tranexamic Acid Cyklokapron Micro Labs Ltd India Source: Company Data, PL Research Mild appreciation of INR v/s USD is unlikely to have any major impact on operations of Indian Pharma companies with significant infrastructure in export markets. Companies such as Sun Pharma, Dr Reddy’s, Lupin, Cipla, Glenmark, Aurobindo, Zydus Cadila, and Jubilant Life is expected to offer less forex volatility in US revenues in Q1FY18E. Lower USD will bring relief in Pharma companies with higher leverage (due to contribution of forex loan) such as Jubilant Life, Aurobindo and Zydus Cadila. Stock Performance Absolute
1M
3M
Relative to Sensex
6M
12M
1M
6M
12M
(16.4)
(25.7)
(5.6) 7.6
27.7
27.3
(22.5)
(11.2)
Aurobi ndo Pha rma
16.6
8.1
1.5
(8.8) 15.2
Ca di l a Hea l thca re
(4.2) 14.9
45.7
44.2
Ci pl a
(0.1) (6.6)
(4.6) 5.7
(1.6)
(6.5)
3M
0.8
(13.9)
Dr. La l Pa thLa bs
(5.1) (11.9)
(24.3)
(10.5)
(19.1)
(42.2)
(27.4)
Dr. Reddy's La bora tori es
3.8
3.6
(10.4)
(23.2) 2.4
(3.6)
(28.3)
(40.1)
Gl enma rk Pha rma ceuti ca l s
4.4
(22.4)
(24.8)
(19.2) 2.9
(29.6)
(42.7)
(36.1)
Indoco Remedi es
1.8
(15.7)
(26.9)
(31.3) 0.3
(23.0)
(44.8)
(48.2)
Jubi l a nt Li fe Sci ences
(3.0) (12.1) 1.4
124.6
(4.4)
(19.4)
(16.5) 107.7
Lupi n
(0.9) (18.9)
(22.7)
(29.8)
(2.4)
(26.1)
(40.6)
(46.7)
Sun Pha rma ceuti ca l Indus tri es
7.3
(15.6)
(11.8)
(44.6)
Thyroca re Technol ogi es
3.6
(0.8) 6.1
(27.7) 5.8
(22.9)
(29.7)
32.9
(8.1)
(11.8) 16.0
2.2
Source: Bloomberg, PL Research July 11, 2017 125
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
37,765
8,323
22.0
5,986
25,859
5,426
Q1FY17
37,046
8,270
22.3
5,846
22,871
5,239
12MFY17
148,448
31,892
21.5
23,017
88,799
YoY gr. (%)
9.0
11.4
47 bps
10.3
16.9
21.0
22.9
11,582
13.0
171.2
1,721 bps
PAT
Sa l es
EBITDA
Margins (%)
PAT
3,788
37,755
6,131
16.2
3,705
3,551
34,998
5,171
14.8
3,652
6.7
7.9
18.6
146 bps
1.4
3,855
34,870
4,113
11.8
(618)
(1.7)
8.3
49.1
444 bps
(699.7)
25,163
160,972
30,585
19.0
18,941
9,520
142,809
21,264
14.9
10,064
164.3
12.7
43.8
411 bps
88.2
Sa l es
EBITDA
Margins (%)
PAT
Sa l es
2,629
657
25.0
414
31,845
2,228
604
27.1
398
32,447
18.0
8.9
(210)bps
4.1
(1.9)
2,199
494
22.4
310
36,119
19.6
33.2
256 bps
33.7
(11.8)
11,031
2,813
25.5
1,836
151,524
9,124
2,365
25.9
1,542
142,117
20.9
18.9
(43)bps
19.1
6.6
Dr. Reddy's La bora tori es
EBITDA
Margins (%)
5,243
16.5
3,902
12.0
34.4
5,905
(11.2) 30,532
24,878
22.7
Gl enma rk Pha rma ceuti ca l s
PAT
Sa l es
EBITDA
Margins (%)
PAT
Sa l es
2,188
24,530
5,059
20.6
3,255
3,079
1,682
19,095
3,192
16.7
2,475
2,525
444 bps
30.1
28.5
58.5
390 bps
31.5
21.9
16.3
3,376
24,572
4,438
18.1
75
2,656
11 bps
(35.2)
(0.2)
14.0
256 bps
4,226.2
15.9
20.2
13,527
97,587
21,225
21.8
12,597
11,607
17.5
13,077
91,857
20,367
22.2
11,088
10,694
264 bps
3.4
6.2
4.2
(42)bps
13.6
8.5
Indoco Remedi es
EBITDA
Margins (%)
400
13.0
372
14.7
7.7 212
(171)bps 8.0
89.0 1,451
502 bps 12.5
1,291
12.1
12.4
43 bps
PAT
Sa l es
EBITDA
Margins (%)
PAT
224
16,104
3,791
23.5
1,693
198
14,195
3,682
25.9
1,616
12.9
13.4
3.0
(240)bps
4.8
179
16,414
3,050
18.6
1,501
24.6
(1.9)
24.3
496 bps
12.8
768
61,098
15,305
25.1
771
59,102
12,491
21.1
(0.3)
3.4
22.5
392 bps
Sa l es
EBITDA
Margins (%)
PAT
Sa l es
40,602
7,002
17.2
3,695
69,943
43,136
11,822
27.4
8,819
80,067
(5.9)
(40.8)
(1,016)bps
(58.1)
(12.6)
41,619
6,900
16.6
3,802
68,252
(2.4)
1.5
67 bps
(2.8)
2.5
7,702
184,860
40,484
21.9
24,650
325,522
5,756
171,198
41,186
24.1
25,575
302,642
33.8
8.0
(1.7)
(216)bps
(3.6)
7.6
EBITDA
14,032
26,847
(47.7) 12,357
13.6
85,612
87,751
(2.4)
Margins (%)
PAT
Sa l es
EBITDA
Margins (%)
PAT
20.1
11,114
853
321
37.6
177
33.5
24,103
694
273
39.4
164
(1,347)bps
(53.9)
23.0
17.4
(178)bps
8.0
196 bps
(9.2)
(2.7)
(3.4)
(27)bps
(6.5)
26.3
56,238
3,944
1,595
40.5
1,020
29.0
69,644
3,068
1,184
38.6
710
(269)bps
(19.2)
28.5
34.8
187 bps
43.8 Sa l es
EBITDA
Aurobi ndo Pha rma
Margins (%)
PAT
Sa l es
EBITDA
Ca di l a Hea l thca re
Margins (%)
Ci pl a
Dr. La l Pa thLa bs
Jubi l a nt Li fe Sci ences
Lupi n
Sun Pha rma ceuti ca l Indus tri es
Thyroca re Technol ogi es
YoY gr. (%)
1.9
0.6
(28)bps
2.4
13.1
3.6
Q4FY17 QoQ gr. (%) 12MFY18E
35,821 5.4 161,871
6,617 25.8 35,531
18.5
357 bps 22.0
5,325 12.4 25,385
25,249 2.4 103,827
4,636 17.0 31,408
(193)bps 18.4
262 bps 30.3
18.1
12,237
877
332
37.8
190
Source: Company Data, PL Research. Note: PAT is adjusted for one‐offs July 11, 2017 126
Apr‐Jun 2017 Earnings Preview
Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) 2017
2018E
2019E
Apr‐Jun'17
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
Net Sales
1,169,857
1,273,843
1,391,091
Net Sa l es
290,965
289,302
0.6
288,647
0.8
56,384
69,372
(18.7) 49,053
14.9
Growth (%)
6.9
8.9
9.2
EBITDA
EBITDA
256,251
296,541
319,487
Margin (%)
19.4
24.0
Margin (%)
21.9
23.3
23.0
PAT (Excl . Ex Items )
36,240
52,504
PAT
170,763
187,827
207,372
Growth (%)
1.6
10.0
10.4
24.3
22.1
20.0
PE (x)
17.0
238 bps
(31.0) 30,232
(460)bps
19.9
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. Aurobindo Pharma Ra ti ng
BUY
Pri ce (Rs )
710
Ta rget Pri ce (Rs )
877
M/Ca p (Rs bn)
415.9
Sha res o/s (m)
585.9
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
FY17
FY18E
FY19E
Y/e March
148,448
161,871
179,167
31,892
35,531
39,954
21.5
22.0
22.3
23,017
25,385
28,533
39.3
43.3
48.7
5.0
10.3
12.4
Operating Metrics
RoE (%)
27.6
24.9
23.3
PE (x)
18.1
16.4
14.6
P / BV (x)
4.4
3.8
3.1
EV / E (x)
13.8
12.4
10.5
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
We expect ARBP’s Q1FY18E revenues to grow at 5% QoQ to Rs37.7bn, led by US sales of Meropenem, gStrattera and few more launches ocurred at the fag end of Q4FY17. While sales of Isosulfane Blue has been stopped since Feb 2017 impacting injectable sales, limited competition in gStrattera was a positive surprise in Q1FY17E. Only four generics have received approvals and there are only three generic launches in Strattera. EBITDA to grow by 26% QoQ, while EBITDA margin to expand by 350bps QoQ due to quality launches since Mar 2017. EU sales to be mildly impacted from depreciation of Euro though EBITDA margin to be maintained at 5%. ARBP received 16 approvals in Q1FY18 with growing number of products in injectables, OCs and controlled‐subs in US generics. July 11, 2017 Net Sales
EBITDA
Margin (%)
Q1
FY18E
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
37,765
37,046
1.9
35,821
161,871
148,448
9.0
8,323
8,270
0.6
6,617
35,531
31,892
11.4
22.0
22.3
(28)bps
18.5
22.0
21.5
47 bps
Reported PAT
5,986
5,850
2.3
5,325
25,385
23,017
10.3
PAT (Excl. Ex Items)
5,986
5,846
2.4
5,325
25,385
23,017
10.3
US Formulations
16,900
17,039
(0.8)
16,432
75,725
68,272
10.9
EU & ROW
10,103
10,252
(1.5)
9,807
42,271
40,327
4.8
ARV formulations
3,121
3,030
2.4
2,619
13,276
11,854
12.0
APIs
7,641
7,346
3.2
7,627
32,457
30,420
6.7
127
Apr‐Jun 2017 Earnings Preview
Cadila Healthcare Ra ti ng
Accumulate
Pri ce (Rs )
518
Ta rget Pri ce (Rs )
519
M/Ca p (Rs bn)
530.6
Sha res o/s (m)
1,024.0
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sa l es
88,799
103,827
107,000
EBITDA
11,582
31,408
29,479
13.0
30.3
27.6
9,520
25,163
24,154
9.3
24.6
23.6
Margin (%)
PAT
EPS (Rs )
Growth (%)
Cadila’s Q1FY18E revenues is expected to increase by 2% QoQ due to late approvals of generics from Moraiya plant and competitive intensity in HCQS. Launch of AG of Asacol HD and Lailda in US is expected to grow gradually. With estimated US$155m revenue in US in Q1FY18E and delay in launch of gLialda, management remain focussed on maintaining its market share in limited competition AG drugs. Brazil formulation sales is expected to be better with 20% YoY growth due to traction in new approvals and market share. Domestic formulations will grow at 8% YoY though there could be negative surprise due to destocking before GST implementation. (59.3) 164.3
(4.0)
Y/e March
Net Sales
Q1
FY18E
Q1
FY17
25,859
22,871
5,426
21.0
Reported PAT
PAT (Excl. Ex Items)
EBITDA
Margin (%)
YoY gr. (%)
Q4
FY17
12M
FY18E
103,827
12M
FY17
88,799
YoY gr. (%)
13.1
25,249
16.9
5,239
3.6
4,636
31,408
11,582
171.2
22.9
(193)bps
18.4
30.3
13.0
1,721bps
3,788
3,371
12.4
3,855
25,163
9,520
164.3
3,788
3,551
6.7
3,855
25,163
9,520
164.3
10,075
8,483
18.8
9,851
45,175
36,603
23.4
Operating Metrics
RoE (%)
15.0
31.8
24.2
PE (x)
55.7
21.1
22.0
Domes tic Formulation
8,491
7,862
8.0
8,402
35,915
32,650
10.0
P / BV (x)
7.6
6.0
4.8
Consumer Healthcare
1,091
1,161
(6.0)
1,200
4,762
4,643
2.6
EV / E (x)
48.9
17.7
18.5
429
390
10.0
514
1,680
1,600
5.0
US Formulations
Income from JVs
Cipla Cipla’s Q1FY18E revenue to grow at 8% QoQ due to traction in Invagen revenues post acquisition in US and secondary market growth in South Africa formulations. Nevertheless, the depreciation of South African Zar may keep the reported sales growth moderate in Q1FY18E. Destocking due to GST implementation may negatively surprise India sales growth though we estimate 6% YoY growth due to seasonal advantages of acute‐therapy drugs. US sales to grow due to quality launches in the last six months. EU and UK business to remain tepid in Q1FY18E. Ra ti ng
Reduce
Pri ce (Rs )
549
Ta rget Pri ce (Rs )
485
M/Ca p (Rs bn)
442.0
Sha res o/s (m)
804.5
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
FY18E
FY19E
142,809
160,972
182,355
21,264
30,585
35,650
14.9
19.0
19.6
10,064
18,941
26,032
12.5
23.5
32.4
(26.1) 88.2
37.4
Net Sales
EBITDA
Margin (%)
Q1
FY18E
37,755
Q1
FY17
34,998
YoY gr. (%)
7.9
Q4
12M
12M
FY17
FY18E
FY17
34,870 160,972 142,809
6,131
5,171
18.6
4,113
16.2
14.8
146 bps
11.8
30,585
YoY gr. (%)
12.7
21,264
43.8
19.0 14.9
411 bps
Reported PAT
3,705
3,652
1.4
(618) 18,941
10,064
88.2
PAT (Excl. Ex Items)
3,705
3,652
1.4
(618) 18,941
10,064
88.2
13.6
15.6
Operating Metrics
43.9
23.3
17.0
India Formulations
15,359
14,490
6.0
11,970
62,375
56,064
11.3
Exports
20,981
20,130
4.2
22,230
98,942
86,834
13.9
1,415
1,310
8.0
1,620
7,572
7,011
8.0
P / BV (x)
3.5
2.9
2.5
22.4
15.0
12.8
July 11, 2017 Y/e March
8.4
EV / E (x)
Quarterly Table (Rs m) FY17
APIs
128
Apr‐Jun 2017 Earnings Preview
Dr. Lal PathLabs Ra ti ng
BUY
Pri ce (Rs )
851
Ta rget Pri ce (Rs )
1,202
M/Ca p (Rs bn)
70.7
Sha res o/s (m)
83.1
Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sa l es
9,124
11,031
13,482
EBITDA
2,365
2,813
3,397
25.9
25.5
25.2
1,542
1,836
2,281
18.6
22.1
27.5
16.1
19.1
24.2
Margin (%)
PAT
EPS (Rs )
Growth (%)
Quarterly Table (Rs m) Q1
FY18E
2,629
Q1
FY17
2,228
657
604
8.9
494
2,813
2,365
18.9
25.0
27.1
(210)bps
22.4
25.5
25.9
(43)bps
Reported PAT
414
398
4.1
310
1,836
1,542
19.1
PAT (Excl. Ex Items )
414
398
4.1
310
1,836
1,542
19.1
Y/e March
Net Sales
RoE (%)
26.4
25.8
26.8
EBITDA
PE (x)
45.8
38.5
31.0
Margin (%)
P / BV (x)
10.7
9.2
7.5
EV / E (x)
28.9
24.0
19.5
YoY gr. (%)
18.0
Q4
12M
12M
FY17
FY18E
FY17
2,199 11,031 9,124
YoY gr. (%)
20.9
Dr. Reddy’s Laboratories DRL’s revenues in Q1FY18E continues to be impacted due to new competitions in gVidaza (Natco and Shilpa Medicare) and gDacogen and we expect similar scenario could arrive in Nexium post Aurobindo’s launch in July 2017. Exposure in Russia and Venezuela will not be a concern in Q1FY18 as Rouble is stable, while DRL stopped exports to Venezuela. Domestic formulations is likely to grow at 5% due to destocking before GST implementation. PSAI is expected to be impacted due to lower approval by USFDA to its US partners. We expect DRRD continue to incur more than 14% of sales in R&D and promotion costs of NDA products in FY18E‐19E. Ra ti ng
Reduce
Pri ce (Rs )
2,732
Ta rget Pri ce (Rs )
2,075
M/Ca p (Rs bn)
452.9
Sha res o/s (m)
165.8
Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY17
FY18E
FY19E
142,117
151,524
161,719
24,878
30,532
33,233
17.5
20.2
20.6
13,077
13,527
15,641
78.9
81.6
94.3
(33.8) 3.4
15.6
RoE (%)
10.5
10.0
10.1
PE (x)
34.6
33.5
29.0
P / BV (x)
3.7
3.0
2.8
EV / E (x)
20.2
15.6
14.4
DLPL’s Q1FY18E revenue growth is expected to be at 18% YoY benefitting from focus on increasing footfalls and realisation per patient. DLPL is poised to achieve growth in B‐2‐B segment in value and volume on back of hospital lab management contracts. However, we expect a decline of (210bps) in EBITDA margins to 25%. Margin dilution is due to a) increased pricing pressure from peers, alongwith the unorganized sector including smaller labs with PE funding b) higher advertisement and promotional costs and c) increasing costs for setting up of new reference labs. With a) a strong free cash flow and b) guidance of 15‐16% (+/‐2%) sustainable annual growth with 25% EBITDA margin, we expect valuations of diagnostic companies to remain at a premium. July 11, 2017 Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
31,845
32,447
(1.9)
36,119
151,524
142,117
6.6
5,243
3,902
34.4
5,905
30,532
24,878
22.7
16.5
12.0
444 bps
16.3
20.2
17.5
264 bps
Reported PAT
2,188
1,682
30.1
3,376
13,527
13,077
3.4
PAT (Excl. Ex Items)
2,188
1,682
30.1
3,376
13,527
13,077
3.4
5,484
5,223
5.0
5,711
26,233
23,422
12.0
Operating Metrics
India Formulations
14,300
15,523
(7.9)
15,349
67,221
64,020
5.0
Rus sia
US Formulations
3,450
3,000
15.0
3,400
14,906
14,102
5.7
PSAI
4,151
4,692
(11.5)
5,401
23,068
22,018
4.8
129
Apr‐Jun 2017 Earnings Preview
Glenmark Pharmaceuticals Ra ti ng
BUY
Pri ce (Rs )
676
Ta rget Pri ce (Rs )
974
M/Ca p (Rs bn)
190.8
Sha res o/s (m)
282.2
Glenmark’s revenue growth to be 28% YoY in Q1FY18E on the back of Zetia exclusivity till May‐
end 2017. With benefits of Zetia exclusivity, price/volume rise in Mupirocin and new launches in derma, we expect US sales to be US$180m in Q1FY18E. We expect management to opt for lower sales and shorter working capital cycle in troubled countries. Sales growth in semi‐
regulated markets would rebound with even‐out effect of post stoppage of Venezuela sales and return of sales growth in Russia with stable Rouble. India sales growth is expected to be 10% YoY due to seasonal benefits of acute‐therapy portfolio. Quarterly Table (Rs m) Y/e March
Key Figures (Rs m) Net Sales
Y/e March
FY17
FY18E
FY19E
Net Sa l es
91,857
97,587
106,768
EBITDA
20,367
21,225
25,964
22.2
21.8
24.3
11,088
12,597
16,172
Margin (%)
PAT
EPS (Rs )
39.3
44.6
57.3
49.2
13.6
28.4
RoE (%)
27.3
24.8
25.0
PE (x)
Growth (%)
17.2
15.1
11.8
P / BV (x)
4.2
3.4
2.6
EV / E (x)
11.2
10.6
8.5
Q1
FY18E
Q1
FY17
24,530
19,095
5,059
20.6
Reported PAT
PAT (Excl. Ex Items)
YoY gr. (%)
Q4
FY17
12M
FY18E
24,572
3,192
58.5
4,438
21,225
20,367
4.2
16.7
390 bps
18.1
21.8
22.2
(42)bps
3,255
2,475
31.5
75
12,597
11,088
13.6
3,255
2,475
31.5
75
12,597
11,088
13.6
Generics
13,440
8,894
51.1
12,002
50,160
48,905
2.6
US Formulations
11,050
6,982
58.3
10,004
36,886
37,007
(0.3)
2,390
1,912
25.0
1,997
9,034
8,094
11.6
Margin (%)
91,857
YoY gr. (%)
28.5
EBITDA
97,587
12M
FY17
6.2
Operating Metrics
APIs
11,090
10,142
9.3
12,296
45,745
41,404
10.5
India Formulations
Branded
5,651
5,138
10.0
5,769
25,342
23,038
10.0
ROW Formulations
2,183
1,949
12.0
2,889
11,074
9,888
12.0
Indoco Remedies We expect Indoco’s Q1FY18E sales growth to be 22% on the back of traction in export formulations. India sales to grow at 4% YoY due to destocking before GST implementation. With Teva’s exclusive launch of gPataday, we expect better traction in US export as well EU exports to Germany. Besides the increasing supply of volumes in gTrusopt and gCosopt to help 50% YoY growth in exports. Indoco’s EBITDA margin to be lower by 170bps YoY due to lower growth in India formulations. Ra ti ng
Reduce
Pri ce (Rs )
196
Ta rget Pri ce (Rs )
151
M/Ca p (Rs bn)
18.1
Sha res o/s (m)
92.2
Key Figures (Rs m) Y/e March
FY18E
FY19E
10,694
11,607
12,901
Y/e March
1,291
1,451
1,755
Net Sales
12.1
12.5
13.6
PAT
771
768
994
Margin (%)
EPS (Rs )
8.4
8.3
10.8
Reported PAT
PAT (Excl. Ex Items)
Net Sa l es
EBITDA
Margin (%)
Growth (%)
(6.0) (0.3) 29.5
EBITDA
Q1
FY18E
3,079
Q1
FY17
2,525
YoY gr. (%)
21.9
400
372
7.7
13.0
14.7
224
198
224
Q4
12M
12M
FY17
FY18E
FY17
2,656 11,607 10,694
YoY gr. (%)
8.5
212
1,451
1,291
12.4
(171)bps
8.0
12.5 12.1
43 bps
12.9
179
768
771
(0.3)
198
12.9
179
768
771
(0.3)
RoE (%)
12.5
11.3
13.3
Operating Metrics
PE (x)
23.5
23.6
18.2
Domes tic Formulation
1,476
1,419
4.0
1,301
6,435
5,850
10.0
Export Formulations
1,382
924
49.7
1,215
4,536
4,144
9.5
200
176
14.0
120
636
615
3.4
P / BV (x)
2.8
2.6
2.3
EV / E (x)
14.7
12.9
10.7
Quarterly Table (Rs m) FY17
July 11, 2017 APIs
130
Apr‐Jun 2017 Earnings Preview
Jubilant Life Sciences Ra ti ng
Accumulate
Pri ce (Rs )
714
Ta rget Pri ce (Rs )
806
M/Ca p (Rs bn)
113.8
Sha res o/s (m)
159.3
We expect JOL’s Q1FY18E revenues to grow at 11% YoY, due to new tractions in LSI business and continuation of growth in Radiopharma sales. JOL’s Pyridine‐based business, LS Ingredients (LSI) contributed 43% of revenues. We expect destocking of vendors to impact its domestic sales of Life Science Chemical business in Q1FY18E. India sales contributes 30% of consolidated revenues of JOL. Jubilant’s price rise in Neutraceuticals (Vit B3) will continue to benefit EBITDA margin. US sales would be driven by stable revenues from Radiology and CMO services. US generics to be driven by Methylprednisolone, Diovan, Mycophenolate Mofetil and Rizatriptan. Key Figures (Rs m) Y/e March
FY17
FY18E
FY19E
Net Sa l es
59,102
61,098
67,191
EBITDA
12,491
15,305
17,248
21.1
25.1
25.7
5,756
7,702
9,538
Margin (%)
PAT
EPS (Rs )
Quarterly Table (Rs m) Q1
FY18E
16,104
Q1
FY17
14,195
3,791
3,682
3.0
3,050
23.5
25.9
(240)bps
18.6
Reported PAT
1,693
1,616
4.8
1,501
7,702
5,756
33.8
1,693
1,616
4.8
1,501
7,702
5,756
33.8
Y/e March
Net Sales
EBITDA
Margin (%)
YoY gr. (%)
13.4
Q4
12M
12M
FY17
FY18E
FY17
16,414 61,098 59,102
15,305
YoY gr. (%)
3.4
12,491
22.5
25.1 21.1
392 bps
37.0
48.4
59.9
46.6
30.8
23.8
RoE (%)
18.0
20.3
20.7
PAT (Excl. Ex Items)
PE (x)
19.3
14.8
11.9
Operating Metrics
P / BV (x)
3.2
2.7
2.3
Pharmaceutical s
8,150
7,546
8.0
8,085
38,486
33,777
13.9
EV / E (x)
12.4
9.7
8.3
LSI
7,276
6,497
12.0
7,820
23,732
24,487
(3.1)
Growth (%)
Lupin We expect Lupin’s Q1FY18E sales to decline by 3% QoQ due to disadvantages of high‐base in US generics. The company’s base business continues to be impacted from channel consolidations and strong price erosion in gGlumetza and gFortamet since Dec 2016. India sales is likely to increase by 8% due to structural headwinds (destocking) in Q1FY18E. We expect sales in Japan to continue to be a laggard due to lower offtake in hospitals and annual price restriction, which used to be Bi‐annual practice. Adj. EBITDA margin to increase by 60bps QoQ in Q1FY18E. Ra ti ng
Reduce
Pri ce (Rs )
1,150
Ta rget Pri ce (Rs )
1,119
M/Ca p (Rs bn)
519.2
Sha res o/s (m)
451.6
Y/e March
Key Figures (Rs m) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY17
171,198
41,186
FY18E
184,860
40,484
FY19E
205,694
45,870
24.1
21.9
22.3
25,575
24,650
28,076
56.6
54.6
62.2
12.9
(3.6) 13.9
Net Sales
EBITDA
Margin (%)
Q1
FY18E
40,602
Q1
FY17
43,136
7,002
11,822
YoY gr. (%)
(5.9)
(40.8)
Q4
12M
12M
FY17
FY18E
FY17
41,619 184,860 171,198
6,900
16.6
40,484
41,186
YoY gr. (%)
8.0
(1.7)
21.9 24.1 (216)bps
17.2
27.4
Reported PAT
3,695
8,819
(58.1)
3,802
24,650
25,575
(3.6)
PAT (Excl. Ex Items)
3,695
8,819
(58.1)
3,802
24,650
25,575
(3.6)
India Formulations
10,259
9,499
8.0
8,788
43,827
39,843
10.0
17,225
21,886
(21.3)
19,007
99,151
89,972
10.2
(1,016)bps
Operating Metrics
RoE (%)
20.7
17.2
17.2
North America
PE (x)
20.3
21.1
18.5
APAC
6,066
5,416
12.0
6,118
20,065
17,651
13.7
ROW Formulations & 1,821
1,457
25.0
1,879
18,901
16,054
17.7
APIs
2,818
2,966
(5.0)
2,815
11,309
11,147
1.5
P / BV (x)
3.8
3.4
3.0
EV / E (x)
14.4
14.5
12.8
Quarterly Table (Rs m) July 11, 2017 131
Apr‐Jun 2017 Earnings Preview
Sun Pharmaceuticals Ra ti ng
Reduce
Pri ce (Rs )
563
Ta rget Pri ce (Rs )
501
M/Ca p (Rs bn)
1,350.8
Sha res o/s (m)
2,399.3
We expect Sun Pharma to grow at 3% QoQ, with limited competition in Gleevec and launch of gZetia in US. With delay in launching gGlumetza, Sun lost sizeable opportunity from the benefits of limited competition in the drug in US in Q1FY18E. Taro’s growth in derma portfolio in the US remains bleak post entry of new generics from multiple competitors. We expect Taro’s revenues to decline which could be partially offset from the launch of new drugs. With structural headwinds, India formulations to grow at 10% YoY, including growing focus on OTC drugs such as Revital post acquisition of Ranbaxy. Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY17
Net Sa l es
EBITDA
PAT
FY19E
325,522
349,691
87,751
85,612
84,800
29.0
26.3
24.3
69,644
56,238
54,605
29.0
23.4
22.8
EPS (Rs )
Growth (%)
FY18E
302,642
Margin (%)
Net Sales
Q1
FY18E
69,943
Q1
FY17
80,067
YoY gr. (%)
(12.6)
EBITDA
14,032
26,847
(47.7)
20.1
33.5
Y/e March
33.5
(19.2) (2.9)
Margin (%)
(1,347)bps
Q4
12M
12M
FY17
FY18E
FY17
68,252 325,522 302,642
12,357
18.1
85,612
87,751
YoY gr. (%)
7.6
(2.4)
26.3 29.0 (269)bps
Reported PAT
11,114
24,103
(53.9)
12,237
56,238
69,644
(19.2)
PAT (Excl. Ex Items)
11,114
24,103
(53.9)
12,237
56,238
69,644
(19.2)
Formul ations
64,727
75,185
(13.9)
64,159
309,893
284,287
9.0
20,397
18,543
10.0
19,164
87,742
78,341
12.0
Operating Metrics
RoE (%)
20.0
14.3
12.3
India Formulations
PE (x)
19.4
24.0
24.7
US Formulations
24,375
40,706
(40.1)
25,545
137,635
135,301
1.7
ROW Formulations
19,955
15,936
25.2
19,451
84,517
70,645
19.6
5,027
4,698
7.0
3,955
17,870
16,068
11.2
P / BV (x)
3.7
3.2
2.9
EV / E (x)
14.6
15.0
14.8
Thyrocare Technologies Ra ti ng
BUY
Pri ce (Rs )
740
Ta rget Pri ce (Rs )
1,067
M/Ca p (Rs bn)
39.8
Sha res o/s (m)
53.7
APIs
We expect sales to grow at 23% with 37.6% EBITDA margin in Q1FY18E. Revenue and EBITDA margins are expected to increase (YoY) on the back of increased corporate deals and online business verticals. Benefitting from addition of new RPLs and PET‐
CT centers (through franchisee in Surat and Baroda), Thyrocare to maintain its asset‐
light strategy, resulting in higher return ratios. Aarogyam contributed 53% to the topline in Q4FY17 and is expected to be around 51% in Q1FY18E. With a smaller base as compared to the organized peers, cost‐leadership and aggressive brand‐building, Thyrocare remains our top pick in the diagnostic space. Quarterly Table (Rs m) Key Figures (Rs m) Y/e March
FY18E
FY19E
Net Sa l es
3,068
3,944
5,123
EBITDA
1,184
1,595
2,136
38.6
40.5
41.7
710
1,020
1,346
Margin (%)
PAT
EPS (Rs )
13.2
19.0
25.1
37.0
43.8
32.0
RoE (%)
19.2
26.0
30.2
PE (x)
56.0
39.0
29.5
P / BV (x)
10.6
9.7
8.3
Growth (%)
EV / E (x)
July 11, 2017 FY17
33.6
24.6
18.1
Y/e March
Net Sales
EBITDA
Margin (%)
Q1
FY18E
853
Q1
FY17
694
YoY gr. (%)
23.0
Q4
12M
12M
FY17
FY18E
FY17
877 3,944 3,068
321
273
17.4
332
1,595
YoY gr. (%)
28.5
1,184
34.8
40.5 38.6
187 bps
37.6
39.4
(178)bps
37.8
Reported PAT
177
164
8.0
190
1,020
710
43.8
PAT (Excl. Ex Items)
177
164
8.0
190
1,020
710
43.8
806
620
30.0
785
3,535
2,732
29.4
Imaging Services
53
42
25.0
48
230
183
25.5
Others
39
31
25.0
44
179
153
16.9 Operating Metrics
Diagnostic Testing Se
132
Apr‐Jun 2017 Earnings Preview
Others Stock Performance Absolute
Relative to Sensex
1M
3M
6M
12M
1M
3M
6M
12M
Al l ca rgo Logi s ti cs
(2.5)
(3.7)
(2.4)
(7.4)
(3.9)
(10.9)
(20.3)
(24.3)
Na vneet Educa ti on
(6.4) 9.9
38.0
77.7
(7.9) 2.6
20.1
60.8
Ra l l i s Indi a
(2.1)
(1.1) 17.2
16.1
(3.6)
(8.4)
(0.7)
(0.8)
Spi ceJet
8.2
29.1
94.2
90.2
6.8
21.9
76.3
73.3
Tea mLea s e Servi ces
13.8
41.9
66.7
33.3
12.3
34.7
48.8
16.4
Va Tech Wa ba g
(2.3)
(3.2) 38.3
12.7
(3.8)
(10.5) 20.4
(4.2)
VRL Logi s ti cs
2.5
(3.0) 17.3
7.0
1.1
(10.2)
(9.9) (0.6)
Source: Company Data, PL Research Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
Sa l es
Al l ca rgo Logi s ti cs
Na vneet Educa ti on
Ral l i s Indi a
Spi ceJet
Tea mLea s e Servi ces
14,689
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
13,989
5.0
13,628
7.8
61,464
0.2
1,056
26.4
12MFY17 YoY gr. (%)
55,834
10.1
5,081
4,649
9.3
133 bps 8.3
8.3
(6)bps
EBITDA
1,334
1,332
Margins (%)
9.1
9.5
PAT
667
610
9.4
572
16.6
2,501
2,318
7.9
Sa l es
6,147
5,605
9.7
2,098
193.0
13,212
11,813
11.8
7.9
279
595.7
2,959
2,813
5.2
1,830 bps 22.4
23.8
(141)bps
(44)bps 7.7
EBITDA
1,944
1,802
Margins (%)
31.6
32.1
PAT
1,259
1,136
10.9
161
682.7
1,801
1,706
5.6
Sa l es
4,972
4,677
6.3
3,667
35.6
18,939
16,783
12.8
4.1
416
88.1
2,954
2,634
12.2
439 bps 15.6
15.7
(9)bps
(53)bps 13.3
EBITDA
783
752
Margins (%)
15.7
16.1
PAT
636
552
15.1
311
104.3
1,923
1,700
13.1
Sa l es
16,796
15,215
10.4
16,257
3.3
78,262
61,405
27.5
61.8
7,777
6,145
26.5
221 bps 9.9
10.0
(7)bps
(33)bps 11.4
EBITDA
1,025
1,924
(46.7) 633
Margins (%)
6.1
12.6
(654)bps 3.9
PAT
716
1,490
(51.9) 416
72.0
5,504
4,695
17.2
Sa l es
8,252
6,877
20.0
8,169
1.0
36,175
30,418
18.9
155.0
147
6.7
707
442
59.7
10 bps 2.0
1.5
50 bps
EBITDA
157
62
Margins (%)
1.9
0.9
PAT
159
73
101 bps 1.8
NA
385
(58.7)
709
663
6.9 Source: Company Data, PL Research July 11, 2017 133
Apr‐Jun 2017 Earnings Preview
Summary Financials ‐ Quarterly (Rs m) Companies
Q1FY18E
Va Tech Waba g
VRL Logi s ti cs
Q1FY17 YoY gr. (%)
Q4FY17 QoQ gr. (%)
12MFY18E
12MFY17 YoY gr. (%)
Sa l es
6,913
5,803
19.1
11,317
(38.9) 34,489
32,079
7.5
EBITDA
403
275
46.8
1,317
(69.4) 3,174
2,966
7.0
Margins (%)
5.8
4.7
110 bps 11.6
(580)bps 9.2
9.2
(4)bps
PAT
180
52
243.5
757
NA
1,658
1,024
61.9
Sa l es
4,843
4,586
5.6
4,429
9.3
19,598
18,031
8.7
EBITDA
701
670
4.6
418
68.0
2,567
2,182
17.7
Margins (%)
14.5
14.6
505 bps 13.1
12.1
100 bps
PAT
303
265
(14)bps 9.4
NA
84
261.9
1,017
705
44.4 Source: Company Data, PL Research Consolidated Sectoral Data Quarterly Table (Rs m) Key Figures (Rs m) 2017E
2018E
Apr‐Jun'17
2019E
Apr‐Jun'16 YoY gr. (%)
Jan‐Mar'17 QoQ gr. (%)
Net Sales
226,363
262,139
298,172
Net Sa l es
62,612
56,752
10.3
59,565
5.1
Growth (%)
13.5
15.8
13.7
EBITDA
6,347
6,816
(6.9) 4,266
48.8
EBITDA
21,831
25,219
29,131
Margin (%)
10.1
12.0
Margin (%)
9.6
9.6
9.8
PAT (Excl . Ex Items )
3,921
4,178
PAT
12,811
15,113
17,613
Growth (%)
18.2
18.0
16.5
23.2
19.7
16.9
PE (x)
(187)bps
7.2
298 bps
(6.2) 2,687
45.9
Note: Revenue, EBITDA and PAT numbers are arrived by totaling corresponding numbers of all companies under our coverage in this sector. July 11, 2017 134
Apr‐Jun 2017 Earnings Preview
All Cargo Logistics Ra ti ng
Accumulate
Pri ce (Rs )
169
Ta rget Pri ce (Rs )
194
Quarterly Table (Rs m) M/Ca p (Rs bn)
41.6
Y/e March
Sha res o/s (m)
245.9
Net Sales
Q1
FY18E
14,689
Q1
FY17
13,989
YoY gr. (%)
5.0
Q4
12M
12M
FY17
FY18E
FY17
13,628 61,464 55,834
YoY gr. (%)
10.1
EBITDA
1,334
1,332
0.2
1,056
5,081
4,649
9.3
Key Figures (Rs m) (Ind‐AS) Margin (%)
9.1
9.5
(44)bps
7.7
8.3
8.3
(6)bps
Reported PAT
667
610
9.4
572
2,501
2,318
7.9
PAT (Excl. Ex Items )
667
610
9.4
572
2,501
2,318
7.9
Y/e March
FY17
Net Sa l es
61,464
FY19E
67,638
Operating Metrics
4,649
5,081
6,016
8.3
8.3
8.9
2,318
2,501
2,978
MTO
12,508
11,793
6.1
11,613
52,538
47,558
10.5
9.4
10.2
12.1
CFS
981
1,096
(10.5)
986
4,365
4,306
1.4
(0.8) 7.9
19.0
PES
1,200
1,322
(9.2)
1,145
4,562
4,569
(0.2)
1.3
499
2,259
1,987
13.7
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
55,834
EBITDA
Segment Revenues
RoE (%)
13.1
13.4
14.5
EBIT
PE (x)
18.0
16.6
14.0
MTO
575
568
2.3
2.1
1.9
CFS
291
306
(4.8)
292
1,266
1,312
(3.5)
6.9
PES
70
180
(61.0)
61
456
396
15.3
P / BV (x)
EV / E (x)
10.0
8.7
Navneet Education Navneet is expected to show 12% growth in publishing and 6.5% growth in stationery segment (on a higher base of FY17) with flattish margins YoY. With delay in release of textbooks of class 7 & 9 by education board in Maharashtra and some sluggishness in off‐
take by dealers due to some confusion around GST, we see spill over of business in Q2 as things get normalised. We remain upbeat on 12% plus growth in revenue for FY18 and continue to prefer Navneet in Education space. Ra ti ng
BUY
Pri ce (Rs )
178
Ta rget Pri ce (Rs )
189
M/Ca p (Rs bn)
41.5
Sha res o/s (m)
233.5
Quarterly Table (Rs m) Net Sales
Q1
FY18E
6,147
Q1
FY17
5,605
EBITDA
1,944
1,802
7.9
279
Y/e March
Key Figures (Rs m) (Ind‐AS) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
FY17
11,813
FY18E
13,212
FY19E
14,665
Q4
12M
12M
FY17
FY18E
FY17
2,098 13,212 11,813
2,959
2,813
YoY gr. (%)
11.8
5.2
31.6
32.1
(53)bps
13.3
Reported PAT
1,259
1,136
10.9
161
22.4 23.8 (141)bps
1,801
1,706
5.6
PAT (Excl. Ex Items )
1,259
1,136
10.9
161
1,801
1,706
5.6
2,959
3,284
23.8
22.4
22.4
1,706
1,801
2,003
7.3
7.7
8.6
40.0
5.6
11.2
Publis hing
3,800
3,393
12.0 536
7,038 6,156 14.3
26.7
24.3
23.9
Stationery
2,318
2,176
6.5 1,553
5,264 4,933 6.7
EBIDTA
Publis hing
1,558 1,408
10.7 133
2,323 2,270 2.3
Stationery
417
(4.4) 155
526 553
23.1
20.7
P / BV (x)
6.0
5.3
4.7
EV / E (x)
15.3
14.4
12.9
July 11, 2017 Margin (%)
YoY gr. (%)
9.7
2,813
24.3
AGLL is expected to deliver muted set of numbers due to weak activity in CFS and PES segment. Margin in MTO are expected to see some improvement sequentially. with ~10% volume growth. On a consol basis, we expect AGLL to deliver 9.4% YoY growth in PAT to Rs 667m. Key monitorable would be commentary on freight rates and margins/TEU. Operating Metrics
Segment Revenues
437
(4.8)
135
Apr‐Jun 2017 Earnings Preview
Rallis India Ra ti ng
Accumulate
Pri ce (Rs )
244
Ta rget Pri ce (Rs )
261
M/Ca p (Rs bn)
47.4
Sha res o/s (m)
194.5
Rallis is expected to report 6.3% growth in revenues primarily due to traction in seed with good start of monsoon and better sowing for crops like maize, paddy & cotton. We expect some disruption in pre‐GST quarter with lower off‐take by channel and higher sales return. We assume some moderation in realisation with government asking companies for price‐cut to give relief to farmers from lower crop prices. The capital deployment strategy of Rallis will be key as they continue to hold Rs2.3bn cash on books. Quarterly Table (Rs m) Y/e March
Q1
FY18E
Net Sales
4,972
4,677
6.3
3,667
18,939
16,783
12.8
783
752
4.1
416
2,954
2,634
12.2
Key Figures (Rs m) (Ind‐AS) Y/e March
FY17
Net Sa l es
FY19E
16,783
18,939
20,928
2,634
2,954
3,383
15.7
15.6
16.2
1,700
1,923
2,306
8.7
9.9
11.9
18.5
13.1
19.9
17.0
16.5
18.1
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
RoE (%)
PE (x)
27.9
24.7
20.6
P / BV (x)
4.3
3.9
3.5
EV / E (x)
18.1
15.7
13.5
SpiceJet Ra ti ng
Accumulate
Pri ce (Rs )
125
Ta rget Pri ce (Rs )
119
M/Ca p (Rs bn)
75.1
Sha res o/s (m)
599.5
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
RoE (%)
PE (x)
FY17
FY18E
FY19E
61,405
78,262
93,400
6,145
7,777
9,483
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
15.7
16.1
(33)bps
11.4
15.6 15.7
(9)bps
Reported PAT
636
1,742
(63.5)
311
1,923
2,975
(35.4)
PAT (Excl. Ex Items )
636
552
15.1
311
1,923
1,700
13.1
Pesti cide Bus ines s
2,847
2,780
2.4
3,462
15,616
13,918
12.2
Seeds
2,124
1,897
12.0
205
3,323
2,865
16.0
Pesti cide Bus ines s
231
255
(9.4)
505
2,476
2,281
8.6
Seeds
552
497
NA
(89)
478
353
35.5
Operating Metrics
Sales (Rs m):
EBITDA (Rs m):
Although crude has somewhat corrected, given the high discounts and falling fares, we expect the decline witnessed in the past three quarters to continue in Q1FY18E as well. We expect total revenues to increase 10.4% YoY in Q1FY18 with an EBITDAR margin of 23.3% leading to a fall in EBITDAR of ~17% YoY. Adjusted profits are expected to report a a sharp 48% YoY decline to Rs781mn. Quarterly Table (Rs m) Net Sales
Q1
FY18E
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
16,796
15,215
10.4
16,257
78,262
61,405
27.5
1,025
1,924
(46.7)
633
7,777
6,145
26.5
Margin (%)
6.1
12.6
NA
3.9
9.9 10.0
(7)bps
Reported PAT
716
1,490
(51.9)
416
5,504
4,965
10.9
PAT (Excl. Ex Items )
716
1,490
(51.9)
416
5,504
4,695
17.2
EBITDA
10.0
9.9
10.2
5,504
6,506
7.8
9.2
10.9
29.5
17.2
18.2
ASKM (m)
4,562
3,874
17.8
4,449
18,983
15,771
20.4
(116.6)
542.1
92.7
RPKM (m)
4,132
3,545
16.6
4,084
17,881
15,042
18.9
16.0
13.6
11.5
RASK
3.6
4.0
(8.4) 3.8
4.1
3.9
5.8
CASK
3.6
3.6
(0.4) 3.7 3.8
3.7
4.7
RASK‐CASK
0.1
0.4
(82.4) 0.1
0.2
23.9
(43.2)
19.9
7.3
EV / E (x)
13.1
9.8
7.3
July 11, 2017 YoY gr. (%)
4,695
P / BV (x)
Margin (%)
Y/e March
Key Figures (Rs m) Y/e March
EBITDA
Q1
FY17
Operating Metrics
0.3
136
Apr‐Jun 2017 Earnings Preview
TeamLease Services Ra ti ng
Accumulate
Pri ce (Rs )
1,473
Ta rget Pri ce (Rs )
1,315
M/Ca p (Rs bn)
25.2
Sha res o/s (m)
17.1
Key Figures (Rs m) Y/e March
FY17
Net Sa l es
FY18E
We expect Teamlease Revenues at Rs8252mn which represents a 21% growth YoY. We expect EBIDTA margin at 1.9% up 10bps QoQ and 100bps YoY. The margin expansion on YoY basis is on account of full impact of consolidation of IT staffing acquisitions in 1QFY18. We expect PAT at Rs 159mn which represents a YoY growth of 118%. GST is a big driver for organized staffing companies as they can gain share from unorganized players. We await management commentary on growth outlook for FY18. At CMP of Rs1445/sh, stock trades at 27x FY19E EPS. While valuations are rich, we believe that GST is a big trigger for organized staffing industry and hence can act as a secular growth catalyst. We maintain Accumulate on the stock. FY19E
30,418
36,175
43,049
EBITDA
442
707
872
Margin (%)
1.5
2.0
2.0
PAT
663
709
899
EPS (Rs )
38.8
41.5
52.6
167.6
6.9
26.9
RoE (%)
19.2
17.0
18.1
PE (x)
37.9
35.5
28.0
6.6
5.6
4.6
PAT (Excl. Ex Items )
Growth (%)
P / BV (x)
EV / E (x)
53.3
32.9
26.3
Quarterly Table (Rs m) Y/e March
Net Sales
EBITDA
Q1
FY18E
8,252
Q1
FY17
6,877
YoY gr. (%)
20.0
157
62
155.0
Margin (%)
1.9
0.9
Reported PAT
159
73
159
73
Q4
12M
12M
FY17
FY18E
FY17
8,169 36,175 30,418
YoY gr. (%)
18.9
147
707
442
59.7
101 bps
1.8
2.0 1.5
50 bps
117.8
385
709
663
6.9
117.8
385
709
663
6.9
Va Tech Wabag Ra ti ng
Reduce
Pri ce (Rs )
666
Ta rget Pri ce (Rs )
624
M/Ca p (Rs bn)
36.3
Sha res o/s (m)
54.5
Va Tech Wabag is expected to report strong execution with 19% revenue growth YoY to Rs6.9bn on back of strong order pipeline of Rs73.1bn. Margins are expected to see jump of ~110bps on account of few large projects like Petronas , reducing share of low margin projects like AP Genco and closure of Istanbul O&M and Oman Desalination projects. We expect FY18 earnings see a bounce back after flattish performance for 4 years. Commentary on working capital management and domestic order inflow are the key‐points to monitor. Key Figures (Rs m) (Ind‐AS) Y/e March
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
FY18E
FY19E
32,079
34,489
36,930
2,966
3,174
3,269
9.2
9.2
8.9
1,024
1,658
1,700
18.8
30.4
31.2
15.4
61.9
2.6
Quarterly Table (Rs m) Y/e March
Q1
FY18E
Net Sales
Q1
FY17
YoY gr. (%)
Q4
FY17
12M
FY18E
12M
FY17
YoY gr. (%)
6,913
5,803
19.1
11,317
34,489
32,079
7.5
403
275
46.8
1,317
3,174
2,966
7.0
9.2 9.2
(4)bps
RoE (%)
10.7
15.6
14.3
EBITDA
PE (x)
35.5
21.9
21.4
Margin (%)
5.8
4.7
110 bps
11.6
3.7
3.2
2.9
Reported PAT
180
52
243.5
757
1,658
1,024
61.9
PAT (Excl. Ex Items )
180
52
243.5
757
1,658
1,024
61.9
P / BV (x)
EV / E (x)
FY17
July 11, 2017 12.4
11.3
10.7
137
Apr‐Jun 2017 Earnings Preview
VRL Logistics Ra ti ng
Accumulate
Pri ce (Rs )
336
Ta rget Pri ce (Rs )
335
M/Ca p (Rs bn)
30.6
Sha res o/s (m)
91.2
Net Sa l es
EBITDA
Margin (%)
PAT
EPS (Rs )
Growth (%)
Q1
FY18E
4,843
Q1
FY17
4,586
FY17
701
670
4.6
418
2,567
2,182
17.7
14.5
14.6
(14)bps
9.4
13.1 12.1
100 bps
Reported PAT
303
265
14.7
84
1,017
705
44.4
PAT (Excl. Ex Items )
303
265
14.7
84
1,017
705
44.4
3,753
3,541
6.0
3,574
15,499
14,262
8.7
948
912
4.0
759
3,523
3,262
8.0
Goods Transport
368
339
8.4
285
1,503
1,282
17.3
Bus Operations
135
142
(5.1)
(43)
352
120
192.8
Net Sales
FY18E
FY19E
EBITDA
Margin (%)
18,031
19,598
21,564
2,182
2,567
2,825
12.1
13.1
13.1
705
1,017
1,221
Operating Metrics
7.7
11.2
13.4
Segment Revenues
(29.7) 44.4
20.0
Goods Transport
RoE (%)
13.8
17.9
19.4
Bus Operations
PE (x)
43.4
30.1
25.1
EBIT
P / BV (x)
5.7
5.1
4.6
EV / E (x)
14.8
12.3
10.8
Quarterly Table (Rs m) Y/e March
Key Figures (Rs m) (Ind‐AS) Y/e March
VRL Logistics is expected to report 5.6% revenue growth primarily aided by better performance in BT as Q1 is a seasonally strong quarter. GT segment to see sluggish growth with lower business activity in pre‐GST quarter. Margins are looking flat YoY due higher fuel prices YoY & lower quantum of bio‐diesel. We would watch out for management commentary on volumes for FY18 and capex guidance (including recently announced capex of Rs830m in Surat, Gujarat) July 11, 2017 YoY gr. (%)
5.6
Q4
12M
12M
FY17
FY18E
FY17
4,429 19,598 18,031
YoY gr. (%)
8.7
138
Apr‐Jun 2017 Earnings Preview Annexure Auto Nifty: Company & Sector Valuations PAT (Rs m) EPS (Rs) PER (x) Wgt (%) Mcap (Rs m)
No. of Shares (m)
CMP (Rs)
2016
2017
2018 2019
2016
2017
2018
2019
2016 2017 2018
2019 1 Bajaj Auto 1.0% 783,678
287.2
2,708
39,297
38,276
40,137 46,009
135.8
132.3
138.7
159.0
20.1 20.6 19.7
17.2 27.1
(2.6)
4.9 14.6
27.1
(2.6)
4.9
14.6
33,771
38,831 41,947
158.2
169.1
194.4
210.0
23.5 22.0 19.2
17.7 25.9 23.9 18.4
16.0 42.0 30.8 26.1
22.7 10.3 14.5 11.0
8.6 59.9 41.7 40.3
34.9 56.2 45.1 34.8
28.8 23.0 23.7 19.5
16.4 Growth (%) 2 Hero Honda Motors 1.3% 735,214
197.4
3,683
31,601
32.5
6.9
15.0 8.0
32.5
6.9
15.0
8.0
1.8% 854,623
621.1
1,375
31,530
34,072
44,412 51,071
53.2
57.5
74.9
86.2
23.5
8.1
30.3 15.0
23.3
8.1
30.3
15.0
53,804
73,377
86,615 99,441
178.2
243.0
286.8
329.3
45.0
36.4
18.0 14.8
45.0
36.4
18.0
14.8
143,531
102,499
134,622 171,931
42.3
30.2
39.6
50.6
(10.2)
(28.6)
27.7 (14.9)
(28.6)
31.3
27.7
Growth (%) 3 Mahindra & Mahindra Growth (%) 4 Maruti Suzuki India 2.7% 2,245,301
300.4
7,429
Growth (%) 5 Tata Motors 2.2% 1,396,091
3,194.0
437
0.4% 1,396,091
5,239.6
265
0.6% 719,841
30.3
23,658
Growth (%) 6 Tata Motors DVR 31.3 Financial Nos. Same as Tata Motors Growth (%) 7 BOSCH Growth (%) 8 Eicher Motors 1.0% 758,195
27.4
11.0% 7,492,943
4,657.7
Growth (%) Total Growth (%) 27,857
12,459
17,411
18,458 21,179
396.8
570.5
590.9
682.1
23.2
39.7
6.0 14.7
23.2
43.8
3.6
15.4
13,380
16,671
21,590 26,095
492.7
613.8
794.9
960.8
29.5 20.9
117.0
24.6
29.5
20.9
117.4
24.6
325,603
316,077
10.9
(2.9)
384,665 457,671
21.7 19.0
Source: Company Data, Bloomberg, PL Research July 11, 2017 139 Apr‐Jun 2017 Earnings Preview BFSI Nifty: Company & Sector Valuations 9 Axis Bank Wgt (%) 2017
2018 2019
2016
2017
2018
2019
2016 2017 2018
2019 503
34.6
15.4
29.8
40.7
14.7
33.1
17.1
12.5 36.6
35.1
28.5
24.8 33.9
29.0
24.0
20.1 17.5
17.4
14.0
11.7 18.1
15.7
12.7
10.6 55.6
38.0
31.8
25.7 36,793
71,310 97,376
223
233
255 287
P/BV (x) 2.3
2.2
2.0 1.8
Growth (%) Book Value (Rs) P/BV (x) Growth (%) 11 HDFC Bank 9.2% 4,291,178 1,574.8
2,587.9
PER (x) 2016
82,237
2,595,063 2,367.1
EPS (Rs) Book Value (Rs) 7.2% 1,206,057 PAT (Rs m) CMP (Rs)
10 HDFC 2.4% Mcap No. of (Rs m) Shares (m)
1,629
1,665
11.8
(55.3)
93.8 36.6
11.0
(55.5)
93.3
36.6
70,931
74,427
92,829 108,064
45.0
47.0
57.8
66.5
216
249
318 361
7.6
6.6
5.2 4.6
20.7
4.9
24.7 16.4
20.0
4.5
23.0
15.1
122,962
145,496
176,814 211,683
48.8
57.2
69.0
82.6
Book Value (Rs) 287
349
405 473
P/BV (x) 5.8
4.7
4.1 3.5
Growth (%) 20.4
18.3
21.5 19.7
17.3
17.0
20.7
19.7
16.7
16.8
21.0
25.1
12 ICICI Bank 97,263
98,011
122,435 146,117
Book Value (Rs) 149
166
183 203
P/BV (x) 2.0
1.8
1.6 1.5
Growth (%) 13 Indiabulls Housing Finance Book Value (Rs) P/BV (x) Growth (%) 14 Kotak Mahindra Bank 5.1% 1.0% 3.2% 1,857,797 452,121 1,836,156 6,324.4
417.4
1,916.5
290
1,066
964
(13.0)
0.8
24.9 19.3
(13.3)
0.5
24.8
19.3
23,447
29,064
36,006 43,346
59.8
68.8
85.0
102.3
254
277
324 372
4.3
3.9
3.3 2.9
23.3
24.0
23.9 20.4
8.9
15.0
23.5
20.4
31,589
46,405
55,488 68,674
17.2
25.2
30.1
37.3
(4.1)
46.4
19.6
23.8
Book Value (Rs) 124
150
179 179
P/BV (x) 7.7
6.4
5.4 5.4
Growth (%) 13.9
46.9
19.6 23.8
July 11, 2017 140 Apr‐Jun 2017 Earnings Preview Nifty: Company & Sector Valuations 15 State Bank Of India Wgt (%) 2.9% Mcap No. of (Rs m) Shares (m)
2,417,837 8,604.4
PAT (Rs m) EPS (Rs) PER (x) CMP (Rs)
2016
2017
2018 2019
2016
2017
2018
2019
2016 2017 2018
2019 280
99,507
104,841
158,841 216,929
13.1
13.3
19.9
27.2
21.5
21.1
14.1
10.3 (6.8)
27.1
11.7
8.9 37.4
31.6
25.1
19.2 24.8
19.8
15.5
12.6 31.8
27.2
20.1
16.1 Book Value (Rs) 186
197
212 234
P/BV (x) 1.5
1.4
1.3 1.2
Growth (%) (24.0)
5.4
51.5 36.6
(25.5)
2.0
49.5
36.6
(23.8)
6.0
13.9
18.2
31.2 (253.3) (125.1)
16 Bank of Baroda (53,955)
13,823
32,072 42,073
Book Value (Rs) 156
159
170 184
P/BV (x) 1.0
1.0
1.0 0.9
Growth (%) (258.8)
(125.6)
132.0 22,865
28,679
36,233 47,253
291
339
390 458
17 IndusInd Bank Book Value (Rs) P/BV (x) Growth (%) 18 Yes Bank 0.4% 2.1% 1.5% 369,933 913,517 688,818 2,277.9
601.2
458.0
161
1,524
1,503
79.0
4.5
3.9 3.3
25.4
26.3 30.4
19.6
18.2
26.0
30.4
25,394
33,301
44,337 54,448
60.6
75.9
97.1
119.3
17.6
25.3
27.9
22.8
Book Value (Rs) 328
483
548 643
P/BV (x) 4.6
3.1
2.7 2.3
Growth (%) 26.6
31.1
33.1 22.8
Total 522,239
610,840
Growth (%) (12.4)
17.0
27,129.6
60.6
5.2
16,628,477 31.2
48.1
27.5
34.9% 132.0
40.7
826,366 1,035,963
35.3 25.4
Source: Company Data, Bloomberg, PL Research July 11, 2017 141 Apr‐Jun 2017 Earnings Preview Cement Nifty: Company & Sector Valuations Wgt (%) Mcap (Rs m) No. of Shares (m)
CMP (Rs)
18 ACC 0.4% 302,215 187.5
1,610
Growth (%) 19 Ambuja Cements PAT (Rs m) 2018 2019
2016
2017
2018
2019
2016 2017 2018
2019 47.8
48.1
36.6
24.0 30.1
46.1
44.6
33.3 49.3
41.3
42.8
27.1 45.5
45.7
41.9
27.8 47.8
48.1
36.6
24.0 6,299
8,277 12,602
33.7
33.5
44.0
67.0
(0.7)
31.4 52.3
(26.6)
(0.7)
31.4
52.3
8,631
11,431 15,288
8.5
5.6
5.8
7.7
0.5% 503,262 1,961.3
252
13,207
27.3
(34.6)
32.4 33.7
27.0
(34.7)
3.5
33.7
1.2% 1,124,693 273.8
4,095
22,866
27,261
26,317 41,522
83.3
99.3
95.9
151.3
9.0
19.2
(3.5) 57.8
9.0
19.2
(3.5)
57.8
42,412
42,191
46,025 69,413
6.0
(0.5)
9.1 50.8
6,340
6,299
8,277 12,602
33.7
33.5
44.0
67.0
(26.6)
(0.7)
31.4 52.3
(26.6)
(0.7)
31.4
52.3
2.1% 1,930,170 2,422.6
Growth (%) Total 2017
6,340
Growth (%) 21 UltraTech Cement 2016
PER (x) (26.6)
Growth (%) 20 Grasim Industries EPS (Rs) 0.4% 302,215 187.5
1,610
Growth (%) Source: Company Data, Bloomberg, PL Research Engineering & Power Nifty: Company & Sector Valuations PAT (Rs m) EPS (Rs) Wgt (%) Mcap (Rs m) No. of Shares (m)
CMP (Rs)
2016
2017
2018
2019 2016
2017
22 Larsen & Toubro 3.8% 1,590,915 937.2
1,706
44,505
64,855
64,039
75,710 47.8
0.8
45.7
(1.3)
18.2 0.5
107,196
112,616
133,651 12.4
Growth (%) 23 NTPC PER (x) 2018
2019
2016
2017
2018
2019 69.6
68.7
81.3
35.5
24.4
24.7
20.9 45.7
(1.3)
18.2
13.0
13.8
16.3
12.8
12.2
11.5
9.7 18.5
14.7
12.8
10.8 30.0
29.7
13.5
11.5 19.7
16.6
15.1
12.8 1.1% 1,311,441 8,297.6
159
101,828
2.0
5.3
5.1
18.7 2.0
5.3
5.9
18.7
24 Power Grid Corp Of India 1.3% 1,095,756 5,221.6
209
59,486
74,502
86,025
101,279 11.4
14.2
16.4
19.4
19.5
25.2
15.5
17.7 19.5
25.2
15.5
17.7
8,734
7,455
16,525
19,470 2.7
2.8
6.1
7.2
420.4
(14.6)
121.7
17.8 1,534.5
0.9
120.6
17.7
214,552
254,008
279,206
330,110 9.7
18.4
9.9
18.2 Growth (%) Growth (%) 25 Tata Power Co 0.4% 220,980 2,696.5
Growth (%) Total 6.5% 4,219,093 Growth (%) 17,152.9
82
Source: Company Data, Bloomberg, PL Research July 11, 2017 142 Apr‐Jun 2017 Earnings Preview FMCG Nifty: Company & Sector Valuations 26 Asian Paints Wgt (%) Mcap No. of (Rs m) Shares (m)
18.7
20.0
23.4
28.2
60.5
56.6
48.5
40.1 16.8
20.8
26.3
6.8
16.8
20.8
49,134
59,521
18.9
19.8
22.7
27.5
57.9
55.3
48.1
39.7 14.9
21.1
7.5
4.8
14.9
21.1
102,009
116,490
137,520
11.6
8.4
9.5
11.1
29.1
40.2
35.5
30.3 9.6
14.2
18.1
(3.5)
(27.5)
13.4
17.2
151,883
163,962
188,028
224,109
49.4
45.8
39.9
33.5 2.4
8.0
14.7
19.2
PAT (Rs m) 2017
2018
2019
2016
2019 61,673
5.3
8.5
945.0
1,117
17,962
26.3
6.8
2.1% 2,375,933 2,174.8
1,098
40,808
42,775
7.5
4.8
93,113
(3.1)
7.8% 4,062,469 12,051.2
334
Growth (%) Total 2019
27,068
1,069,937 Growth (%) 28 ITC 2016
PER (x) 2016 2017 2018
2016
PAT (Rs m) 2017
2018
1.4% Growth (%) 27 Hindustan Unilever 2019
EPS (Rs) 2017
2018
CMP (Rs)
11.4% 7,508,339 15,171.0
Growth (%) 19,178
22,404
2019 Source: Company Data, Bloomberg, PL Research Metals Nifty: Company & Sector Valuations 29 Hindalco Industries Wgt (%) Mcap No. of (Rs m) Shares (m)
CMP (Rs)
2016
30 Tata Steel 31 Coal India 23.7
27.5
37.2
23.2
8.3
7.1 (29.4)
13.6
9.0
7.1 11.1
16.8
16.3
14.1 (6.3)
14.1
9.2
7.9 277.6
16.9
11.1
9.6 195
10,929
(18.0)
74.2
179.4
15.9
(18.0)
60.5
179.4
15.9
1.0% 537,422 968.9
554
(18,333)
39,476
60,010
68,573
(18.9)
40.7
61.9
77.7
NA
NA
52.0
14.3
NA (315.3)
52.0
25.7
142,679
92,678
96,042
110,545
22.6
14.9
15.5
17.8
4.0
(35.0)
3.6
15.1
4.0
(33.9)
3.6
15.1
55,122
105,100
120,995
(41.4)
18.6
28.3
33.0
NA
NA
52.1
16.5
0.9% 1,558,680 6,198.8
251
1.3% 955,691 3,652.6
257 (122,705)
NA
NA
90.7
15.1
4.0% 3,489,031 13,044
12,571
206,317
314,344
361,785
(314.2)
1,541.3
52.4
15.1
Growth (%) Total PER (x) 2017 2018
2,223.4
Growth (%) 32 Vedanta 2016
437,237 Growth (%) 53,191
2019
0.8% Growth (%) 19,041
EPS (Rs) 2017
2018
Growth (%) Source: Company Data, Bloomberg, PL Research July 11, 2017 143 Apr‐Jun 2017 Earnings Preview Oil & Gas Nifty: Company & Sector Valuations 33 BPCL Growth (%) 34 Gail India Growth (%) 35 ONGC Growth (%) 36 Reliance Industries Growth (%) 37 Indian Oil Corporation Growth (%) Total Growth (%) Wgt (%) Mcap No. of (Rs m) Shares (m)
CMP (Rs)
0.9% 960,184 1,454.7
664
0.6% 607,093 1,679.4
359
1.2% 2,048,184 12,666.6
160
6.5% 4,848,571 3,361.1
1,491
1.1% 1,856,170 4,864.2
382
10.4% 10,320,201 24,025.9
2016
80,889
68.3
22,264
(26.7)
170,507
(7.0)
273,840
20.5
182,055
276.8
729,555
35.8
PAT (Rs m) 2017
2018
95,070
77,651
17.5
(18.3)
38,016
42,448
70.8
11.7
208,873
244,228
22.5
16.9
314,250
337,928
14.8
7.5
203,854
203,551
12.0
(0.1)
860,063
905,805
17.9
5.3
2019
91,294
17.6
46,986
10.7
281,382
15.2
344,157
1.8
212,103
4.2
975,922
7.7
2016
55.9
68.3
17.6
(26.7)
19.9
(7.0)
84.5
20.4
37.5
276.8
EPS (Rs) 2017
2018
65.7
53.7
17.5 (18.3)
30.0
25.1
70.8 (16.2)
16.3
19.0
(18.3)
16.9
96.7 103.9
14.4
7.5
42.0
41.9
12.0
(0.1)
2019
63.1
17.6
27.8
10.7
21.9
15.2
105.9
1.8
43.7
4.2
PER (x) 2016 2017 2018
11.8 10.0 12.3
2019 10.5 20.6
12.1
14.4
13.0 8.1
9.9
8.5
7.4 17.1
14.9
13.9
13.6 10.2
9.1
9.1
8.7 14.1
12.0
11.4
10.6 PER (x) 2016 2017 2018
32.1 43.4 23.1
2019 16.8 22.4
33.8
32.7
28.3 25.1
18.8
23.3
24.0 21.6
19.1
19.8
17.4 18.3
17.4
15.8
14.0 23.9
22.1
22.5
20.4 Source: Company Data, Bloomberg, PL Research Pharma Nifty: Company & Sector Valuations 38 Cipla Growth (%) 39 Dr Reddy's Growth (%) 40 Sun Pharma Growth (%) 41 Lupin Growth (%) 42 Aurobindo Pharma Growth (%) Total Growth (%) Wgt (%) Mcap No. of (Rs m) Shares (m)
CMP (Rs)
0.8% 440,214 810.9
546
0.9% 448,382 168.1
2,705
1.6% 1,317,186 2,414.2
550
0.7% 504,711 466.8
1,117
0.5% 408,389 597.6
697
4.5% 3,118,883 4,457.5
2016
13,600
15.2
20,331
(10.9)
52,309
8.9
22,607
(5.9)
21,891
33.9
130,738
6.3
PAT (Rs m) 2017
2018
10,064
18,941
(26.0)
88.2
13,077
13,527
(35.7)
3.4
69,644
56,238
33.1
(19.2)
25,575
24,650
13.1
(3.6)
23,017
25,385
5.1
10.3
141,376 138,741
8.1
(1.9)
2019
26,032
37.4
15,641
15.6
54,605
(2.9)
28,076
13.9
28,533
12.4
152,887
10.2
2016
16.9
15.1
119.2
(11.0)
21.7
(6.3)
50.2
(6.2)
37.4
33.9
EPS (Rs) 2017
2018
12.5
23.5
(26.1)
88.2
78.9
81.6
(33.8)
3.4
29.0
23.4
33.5 (19.2)
56.6
54.6
12.9
(3.6)
39.3
43.3
5.0
10.3
2019
32.4
37.4
94.3
15.6
22.8
(2.9)
62.2
13.9
48.7
12.4
Source: Company Data, Bloomberg, PL Research July 11, 2017 144 Apr‐Jun 2017 Earnings Preview Technology Nifty: Company & Sector Valuations 43 HCL Technologies Growth (%) 44 Infosys Technologies Growth (%) 45 TCS Growth (%) 46 Tech Mahindra Growth (%) 47 Wipro Growth (%) Total Growth (%) Wgt (%) Mcap No. of (Rs m) Shares (m)
CMP (Rs)
1.3% 1,187,111 1,412.1
831
5.2% 2,148,562 2,268.8
936
3.4% 4,594,939 1,957.3
2,332
0.6% 370,671 985.0
380
0.9% 1,254,007 4,865.2
257
11.4% 9,555,291 11,488.5
2016
56,824
(21.6)
134,900
9.4
242,147
31.5
31,154
17.2
88,984
2.8
554,010
12.4
PAT (Rs m) 2017
2018
84,750
86,702
49.1
2.3
143,530
148,517
6.4
3.5
262,890
267,628
8.6
1.8
28,409
30,563
(8.8)
7.6
84,707
84,771
(4.8)
0.1
604,286
618,181
9.1
2.3
2016
60,767
17.2
22,474
12.8
83,241
16.0
PAT (Rs m) 2017
2018
37,998
29,906
(37.5)
(21.3)
27,470
30,184
22.2
9.9
65,468
60,090
(21.4)
(8.2)
2019
95,908
10.6
162,730
9.6
293,648
9.7
33,857
10.8
92,894
9.6
679,036
9.8
2016
40.4
(21.8)
59.0
9.4
122.9
30.7
35.1
13.4
18.0
(48.6)
EPS (Rs) 2017
2018
60.0
63.0
48.4
4.9
62.7
64.9
6.4
3.5
133.4 139.8
8.6
4.8
32.0
34.4
(8.8)
7.6
17.4
17.4
(3.3)
0.1
2019
69.6
10.6
71.1
9.6
153.4
9.7
38.1
10.8
19.1
9.6
PER (x) 2016 2017 2018
20.8 14.0 13.4
2019 12.1 16.1
15.1
14.6
13.3 19.1
17.6
16.8
15.3 10.7
11.8
10.9
9.9 14.3
14.8
14.8
13.5 17.2
15.8
15.5
14.1 PER (x) 2016 2017 2018
25.1 40.1 47.7
2019 32.2 35.0
28.2
24.8
23.0 27.5
35.0
38.1
28.7 Source: Company Data, Bloomberg, PL Research Telecom Nifty: Company & Sector Valuations 48 Bharti Airtel Growth (%) 49 Bharti Infratel Growth (%) Total Growth (%) Wgt (%) Mcap No. of (Rs m) Shares (m)
CMP (Rs)
1.4% 1,542,597 4,045.6
385
0.8% 747,889 1,803.4
404
2.2% 2,290,486 5,849.1
2019
47,029
57.3
32,868
8.9
79,898
33.0
2016
15.2
17.3
11.9
12.6
EPS (Rs) 2017
2018
9.5
8.0
(37.5) (15.9)
14.7
16.7
24.2
13.6
2019
11.8
48.1
18.1
8.0
Source: Company Data, Bloomberg, PL Research July 11, 2017 145 Apr‐Jun 2017 Earnings Preview Media Nifty: Company & Sector Valuations Wgt (%) 50 Zee Entertainment Enterprises Growth (%) Total Growth (%) Mcap No. of (Rs m) Shares (m)
0.7% 487,284 972.5
0.7% 487,284 972.5
CMP (Rs)
507
2016
8,232
(15.8)
8,232
(15.8)
PAT (Rs m) 2017
2018 22,217
15,247 169.9
(31.4) 22,217
15,247 169.9
(31.4) 2019
18,162
19.1
18,162
19.1
2016
8.6
(1.2)
EPS (Rs) 2017 2018
23.1
15.7
169.9 (32.0)
2019
18.9
20.0
PER (x) 2016 2017 2018
58.5 21.7 31.9
2019 26.6 59.2
32.0
26.8 PER (x) 2016 2017 2018
26.9 19.7 20.9
2019 18.2 17.0
13.2
11.4 PER (x) 2016 2017 2018
23.6 20.5 17.8
2019 15.3 21.9
Source: Company Data, Bloomberg, PL Research Ports & Logistics Nifty: Company & Sector Valuations 51 Adani Ports & SEZ Growth (%) Total Growth (%) Wgt (%) Mcap No. of (Rs m) Shares (m)
0.8% 769,566 2,062.9
0.8% 769,566 2,062.9
CMP (Rs)
371
2016
28,674
23.9
28,674
23.9
PAT (Rs m) 2017
2018
39,115
36,983
36.4
(5.5)
39,115
36,983
36.4
(5.5)
2019
42,595
15.2
42,595
15.2
2016
13.9
23.9
EPS (Rs) 2017
2018
18.9
17.8
36.4
(5.5)
2019
20.5
15.1
12.5
Source: Company Data, Bloomberg, PL Research Total Nifty Nifty: Company & Sector Valuations Grand Total* Growth (%) Wgt (%) Mcap No. of (Rs m) Shares (m)
100.0% 67,809,762 Source: Company Data, Bloomberg, PL Research July 11, 2017 7,011.9
CMP (Rs)
PAT (Rs m) 2016
2017
2018
2019
2,803,709 3,325,920 3,813,679 4,427,551
11.0
18.6
14.7
16.1
2016
410.5
9.0
EPS (Rs) 2017
2018
471.8 543.9
15.0
15.3
2019
631.4
16.1
* Not based on Free Float Note: Telecom Nos. are Bloomberg Consensus / Sector Weightages are updated as on April 06, 2017
146 Apr‐Jun 2017 Earnings Preview
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Apr‐Jun 2017 Earnings Preview
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Date: 2017.07.11 11:41:49 +05'30'
148